Retail sales are down but they’re not disastrous

It’s hard to gauge the health of the retail sector here from the latest CSO (Central Statistics Office) data. Retail volumes were flat in December and marginally up in year-on-year terms. Not bad in the context of the worst cost-of-living crisis in decades.

However, when volatile car sales are stripped out, sales fell by nearly 2 per cent in December and were up by just 0.1 per cent on an annual basis. And remember 2021 was blighted by the health restrictions related to Covid. This suggests the consumer environment is weak and probably getting weaker. That’s to be expected.

Real wages are falling while energy, groceries and transport fuels are significantly more expensive than they were a year ago. All of which puts significant downward pressure on discretionary spending. And that’s before we consider the impact of rising mortgage payments. Markets are pricing in at least another two interest rate hikes in the coming months.

There is anecdotal evidence from retail multiples that the contents of grocery baskets are changing as more price conscious consumers opt for cheaper, own-brand items over private label products.

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The CSO figures show sales in bars were up 55 per cent on an annual basis but this is flattered by the hit to the previous year’s sales from Covid.

“With the arrival of the Covid-19 Omicron variant in December 2021 restrictions were reintroduced, including an 8pm closing time for bars just before Christmas,” the CSO said.

With volumes flat or down, sales – in value terms – were up 0.5 per cent in December and by 8.3 per cent over the 12-month period. That means consumers are having to pay more to buy less.

And while most analysts believe inflation may have peaked, prices are still rising are rates that were unthinkable a few years ago, keeping pressure on consumers. At the end of February, there will also be an increase in the VAT charged on gas and electricity bills while the current excise duty reductions on petrol and diesel are also due to end. So things are likely to get worse before they get better.