Christmas retail sales weak as Brexit dampens confidence

Retail sales dropped over the Christmas period, prompting concerns Brexit had dampened consumer confidence, while sterling values sparked a rise in cross-Border shopping.

December’s numbers were described as “grim” and “lacklustre”, although there was optimism too in an annual rise of almost 6 per cent in sales volumes and awareness that Black Friday sales in November had taken their toll on festive spending.

Provisional estimates for last year, released on Friday by the Central Statistics Office, show the volume of retail sales increased by 5.9 per cent in 2016 compared to 2015 and by 3.8 per cent in value terms.

Volumes were down 0.7 per cent in December, although there was an annual increase of 3.4 per cent for the month compared to 2015.

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Excluding motor sales, there was a decrease of 2.7 per cent in the volume of retail sales for the month compared with November, and an increase of 2.0 per cent in the annual figure.

The largest monthly volume decreases were recorded among electrical goods (down 22.7 per cent), hardware, paints and glass (down 4.1 per cent) and fuel (down 2.4 per cent).

The sector with the largest month-on-month volume increase was “non-specialised stores” which gained 0.9 per cent.

There was a decrease of 0.6 per cent in the value of retail sales in December 2016 when compared with November 2016, and there was an annual increase of 1.2 per cent when compared with December 2015.

When motor trades are excluded, there was a decrease of 1.6 per cent in the value of sales and an annual increase of 0.2 per cent.

Consumer confidence

Reaction to the data was positive and negative. Neil McDonnell, chief executive of the Irish Small and Medium Enterprise Association, honed in on Brexit which, he said, had hit the retail sector over Christmas.

“The drop in sterling and the decline in consumer confidence means our retailers are less competitive and as a result are facing difficult challenges,” he said.

“Our latest research shows the retail sector is the most affected by Brexit, with business confidence and profitability expectations dropping to their lowest in five years.

“These stark representations are made all the more real with consumer confidence dropping to a 22-month low in December.”

Stockbrokers Davy said that while the numbers paint a “grim picture” for the key Christmas trading season, Black Friday sales in November had artificially depressed the figures, with electronic goods up 17 per cent in that month and falling back 23 per cent in December.

It noted that sales expanding at a 6 per cent annualised pace in the fourth quarter were “indicative of Ireland’s continued strong recovery” and predicted consumer spending would grow by 3 per cent this year.

The annual growth of retail sales has now slowed to 3.4 per cent, a rate Davy said was robust but still the slowest pace of expansion since November 2013.

Erratic

In its response, Merrion Capital said: “Retail sales continue to remain erratic on a monthly basis and are still swinging back and forth, but the underlying trend is positive.

“While most attention has been on robust car sales in the past couple of years, personal spending in other areas has generally picked up too over the same period and is becoming more broad-based.”

Consumer confidence hit a 15-year high in January, 2016 but has dipped since due to uncertainty over the Brexit referendum, it said.

“Still, overall, spending was quite robust in 2016, with headline sales up 5.9 per cent on average in volume terms.”

Merrion also cited “anecdotal evidence” suggesting the fall in sterling has enticed Irish shoppers to spend in Northern Ireland. Total VAT receipts for 2016 of €12.42 million were €439 million below expectations, it said.

Meanwhile, Goodbody said retail sales data suggests the traditional Christmas shopping period was “a relatively lacklustre affair”, noting the vast majority of categories saw a dip in December, particularly books and newspapers (down 4 per cent year-on-year) and food and beverages (down 2.4 per cent).

“There has been a notable increase in cross-Border shopping to Northern Ireland since the Brexit vote, as Irish consumers take advantage of price differences,” it said.

“There has also been a notable increase in internet sales activity which would not get picked up in the Irish retail sales data.

“These issues are likely playing a role but was also some weakening in consumer confidence in the second half of 2016.”