Retail sales index falling at steepest rate in 25 years

THE DISMAL performance by retailers at the end of 2008 was confirmed yesterday, with new figures showing that retail sales fell 1.2 per cent in November and 8.1 per cent on an annual basis.

The volume of goods bought by consumers has steadily declined over the past year, with the Central Statistics Office (CSO) retail sales index now falling at its steepest annual rate in 25 years.

Retailers have been hit by the Budget 2009 hike in VAT, cross-Border shopping trends and a deepening slowdown in consumer spending.

Consumers bought less of almost everything in November compared to the same month the previous year.

Sales volumes in all major categories are down on an annual basis, with the exception of the CSO’s pharmaceutical, medical and cosmetic articles category.

On a monthly basis, the hardest hit category was books, newspapers and stationery, where spending fell almost 12 per cent.

On an annual basis, spending has declined the most on goods related to the collapsed property sector. Furniture and lighting sales are down 22 per cent, while sales of electrical goods have fallen almost 18 per cent and hardware, paints and glass sales have plunged more than 15 per cent.

Shoppers also cut back on discretionary items, with pubs forced to endure a 12 per cent annual decline in sales and a 3.6 per cent month-on-month decline in November.

Motor trades, which include the repair and maintenance of vehicles as well as car sales, have declined 11 per cent year-on-year, according to the CSO data.

The decline in spending is likely to get worse before it gets better, with anecdotal and retailer reports suggesting no major pick-up in sales before Christmas, economists said yesterday. The escalating number of layoffs is also likely to reduce sales.

“For 2009, the outlook is much weaker given the continued sharp deterioration in the labour market, where unemployment is currently rising at its fastest pace on record,” said Goodbody Stockbrokers economist Deirdre Ryan.

National Irish Bank economist Ronnie O’Toole said the only positive for the retail sector was the rapid fall in mortgage interest rates, which has increased household purchasing power.

Ulster Bank economist Lynsey Clemenger said the continued weakness of sterling against the euro meant that cross-Border shopping would remain prevalent.

The first major groceries retail casualty emerged this week, with Superquinn announcing the closure of its Dundalk store and 400 job losses across the chain.

Food, beverage and tobacco sales, which are relatively recession-proof compared to more discretionary items, have fallen 7 per cent on an annual basis, indicating that either that consumers have cut back on luxury food products, or that they have shopped for groceries in Northern Ireland.

Economists said the half-point increase in the standard rate of VAT would have a detrimental effect on retail sales.

“There is very little the Irish Government can do about weak sterling, but there is a strong argument for reversing the VAT move,” said Alan McQuaid, economist at stockbrokers Bloxham.

“There is an onus on Irish retailers to reduce prices as much as possible and offer an attractive service.

“Shoppers too need to look at themselves and ask whether it is in the long-term interests of the Irish economy to be doing their shopping in UK jurisdictions,” he said.