Sharpest fall in retail sales in 25 years

LAST YEAR saw the sharpest decline in retail sales in over 25 years, as concerns over the economy prompted shoppers to curtail their spending.

According to the Central Statistics Office (CSO) retail sales index the volume of goods bought by consumers declined 4.5 per cent last year, despite a limited improvement of 0.5 per cent in December, largely due to pre-Christmas shopping.

In December, the volume of retail sales was 8.3 per cent lower than the same month in 2007. During the last three months of 2008, retail sales dropped 8 per cent, the largest quarterly decrease since 1982.

Consumers have curtailed spending due to concerns over job security and the weakening economic outlook while a significant proportion of shoppers are shopping in Northern Ireland.

The extent to which shopping in the North has contributed to the decline in retail sales is being examined by the CSO and the Revenue Commissioners and a report is expected by the end of the month.

Sales volumes fell in all major categories on an annual basis, with electrical goods the hardest hit with a drop of 21.6 per cent.

Sales of all goods related to the struggling property sector have declined with hardware, paints and glass volumes down more than 19.8 per cent while volumes of furniture and lighting sales are 16 per cent per cent lower.

Sales volumes of non-discretionary items such as food, pharmaceutical and medical products also declined last year.

Alan McQuaid, senior economist with Bloxham stockbrokers, said the data show a further significant retrenchment in the personal sector.

While lower interest rates and inflation should have provided a boost to disposable income “these positive factors are likely to be more than offset by the negative impact of declining employment, lower pay increases and a rise in direct taxes”.

“Experience from the early 1980s suggests that almost all categories of consumption fall in volume terms during a recession, so this is again likely to be the case during the current period,” he said.

Mr McQuaid said the challenges facing domestic retailers were being compounded by the weakness of sterling.

“The depreciation of the pound versus the euro, combined with the recent VAT rate changes in both jurisdictions, has increased the level of shoppers from the Republic going across the Border to Northern Ireland to purchase their goods.”

Torlach Denihan, director of Retail Ireland, said the fall in retail sales was not surprising and that “at least 25,000 retail employees will be made redundant in 2009”.

Ulster Bank economist Lynsey Clemenger said the 4.5 per cent drop in retail sales reflected the pace of economic deterioration. Irish consumers were changing their spending patterns.

If car sales are excluded, the year-on-year decline is the largest on record and overall sales declined 0.2 per cent in the month of December.