Retail sales fall for second month amid slowdown

SHOPPERS STAYED away from the tills in March, with retail sales falling for the second month in a row as consumer confidence in the economy waned further.

A 9 per cent annual drop in car sales dragged down retail sales in March, according to the Central Statistics Office (CSO). The early timing of Easter also cut the number of regular shopping days, resulting in a 2.1 per cent annual decline in the volume of sales.

Retail sales fell for the first time in four years in February, but economists described the steeper rate of decline in March as "poor" and "very disappointing" yesterday.

"The last thing the economy needs now is a significant retrenchment in consumer spending. But that's how it looks at the moment," said Alan McQuaid, an economist at stockbroking firm Bloxham.

Rossa White, economist at Davy Research, said consumers were being "hit by a triple-whammy of softer labour market conditions, tighter credit and higher inflation". Mr White said the Government had made a "policy blunder" of changing car tax at a time when slower income growth had dented consumer spending.

Car sales are expected to remain subdued in April and May, suggesting there could be further falls in the official retail sales figures in the months ahead.

Further evidence that retailers are feeling the pinch emerged this week, as DSG International, owners of electrical retailers Dixons and PC World, identified Ireland as one of the countries in which trading remained particularly "challenging". Sales of electrical goods have fallen 9.5 per cent since last year.

Furniture sales have fallen the sharpest, plunging 13 per cent, reflecting a collapse in the number of new homes sold. Furniture retailer Habitat closed its shops in Dublin and Galway last week due to a "severe" deterioration in sales, becoming the first major retail casualty of the downturn.

But it is the weak car sales that are to blame for the negative retail sales index. Excluding car sales, the volume of retail sales in March is still up on March 2007, but the rate of growth is just 1.2 per cent.

"We acknowledge that there is slower growth in incomes and declining consumer confidence and so we are seeing lower sales growth," said Aebhric McGibney, spokesman for the Dublin Chamber of Commerce.

"But March was not a normal month this year because we had both St Patrick's Day and Easter falling in it. Easter, in particular, would be regarded as family time, so we lost a weekend," he said.

Retailers not exposed to the housing downturn are still holding up, Mr McGibney said, and would use the quieter time to invest in staff training and refurbishments.

Alan Nolan, chief executive of the Society of the Irish Motor Industry (Simi), said he expected car sales would pick up in June, as consumers take advantage of the last days of the current vehicle registration tax (VRT) regime to buy certain models of car that will attract higher tax from July 1st. He said sales would also receive a boost in July, as consumers who have been waiting to buy environmentally efficient models take advantage of the new VRT rates.

"It should make up for the shortfall we had earlier in the year. But consumers are now in a period of confusion. The timing and the complexity of the change would certainly have exacerbated some of the problems."