Poor car sales hide strength of recovery in retail

As with most datasets related to the Irish economy, the devil is in the detail and April’s retail sales are no exception.

They suggest sales on an annual basis grew at their slowest pace (1.6 per cent) in three years in April. At a glance you’d be forgiven for thinking recovery in the sector was running out of steam.

However, if new car sales are removed the figures paint quite a different picture with overall sales growing by a healthy 6.4 per cent in the 12 months to April.

The disparity relates to the weighting given to car sales in the overall retail basket.

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They are what statisticians like to refer to as lumpy – ballooning at the start of each half year because of the licence registration calendar before falling away sharply. This has long had a distorting effect on retail numbers here.

That aside, the recent dip in new car sales seems to be linked to Brexit. Consumers are taking advantage of the current weakness in sterling to import more used cars from Britain.

Figures from the the Society of the Irish Motor Industry (Simi) show car imports from the UK grew by 56 per cent year on year in the first quarter.

Bargains across the water

Essentially, sterling’s weakness has depressed motor trades here as consumers snap up bargains across the water.

So while new car sales are acting as a drag on overall spending numbers, core sales remain pretty solid with nearly all sectors enjoying strong year-on-year growth.

The sectors with the largest month-on-month volume increases were department stores (8.3 per cent), furniture and lighting (3.9 per cent) and bars (1.6 per cent).

And much of the spending in areas like clothing and footwear is discretionary, suggesting the Irish consumer is far from a cautious animal at present.

The Government’s VAT numbers, which have been compensating for an unexplained weakness in income tax since the start of the year, provide further evidence of the recovery in the sector.

The only retail sector with a persistent negative pattern is books, newspapers and stationery, which is most likely structural - related to the shift online, rather than cyclical.