RETAIL SALES slumped in May, causing concerns that the higher taxes introduced in April’s emergency budget will cost jobs in the retail sector.
Core retail sales, which exclude cars, are now declining at the fastest rate since records began in 1970, falling 9.2 per cent compared with May 2008, according to the latest retail sales index from the Central Statistics Office (CSO).
Retail Ireland, the Ibec-affiliated group that represents employers in the retail sector, said it was clear that consumers were pulling back on discretionary purchases such as clothing. It forecast that a further 25,000 retail staff would lose their jobs as a result of a sharp deterioration in consumer spending.
Many consumers will not have suffered any financial impact from April’s supplementary budget until they received their reduced net pay at the end of May, meaning retail sales data for June is also likely to be subdued.
Retail Ireland director Torlach Denihan urged the Government to reduce the VAT rate from 21 per cent to 18 per cent for a limited period in order to stimulate sales. He also called for a reduction in excise taxes on alcohol in a bid to stem the tide of cross-Border shoppers.
The volume of retail sales is down 15.4 per cent on an annual basis, after falling 1.2 per cent in May compared to April.
Core retail sales during the month of April have been revised downwards by the CSO. It had provisionally indicated a 0.5 per cent rise during the month, however despite heavy discounting during the Easter period, the volume of core retail sales actually declined 0.7 per cent in April compared to March, the CSO said yesterday.
Ulster Bank economist Lynsey Clemenger said the latest index signalled “ongoing weakness rather than the previously hoped-for stabilisation” in retail sales.
Clothing and footwear sales have collapsed 17 per cent over the past year and fell 5.2 per cent in May compared to April. It was also a particularly weak month for food sales, which make up about 40 per cent of the index.
There were also monthly declines in furniture and lighting; hardware, paints and glass; books, newspapers and stationery. Furniture and lighting sales are now declining at an annual rate of 31 per cent, while bar sales, which managed a 1 per cent monthly increase, are down 11.4 per cent year-on-year.
Motor sales rose 3.3 per cent during the month and are down almost 40 per cent year-on-year. Because motor sales are now beginning to improve after a steep decline in the first few months of 2008 – a period that no longer shows up in the CSO’s year-on-year comparisons – the percentage annual decline in total sales is easing. However, sales excluding cars are deteriorating.
The value of retail sales continues to decline at a faster pace than the volume of sales, indicating that retailers’ margins are narrowing as they try to persuade consumers to keep spending through bigger discounts.
The value of sales fell at an annual rate of 19.4 per cent in May.
