Retail sales down 8.1% as consumer spending slumps

Retail sales volumes were 8.1 per cent lower in November compared with the same month of last year as consumers sharply curbed their spending.

This annual decline is the largest volume fall in retail sales since February 1984m and if car sales are excluded, the largest annual decrease since April 1975. In the month the volume of retail sales dropped 1.2 per cent.

Retail sales have declined in nine of the last ten months with only September bucking the trend, with an increase in car sales that month behind that rise.

If car sales are excluded in November the annual decrease was 7.8 per cent and the monthly change was 1.9 per cent.

Dr Ronnie O'Toole, chief economist with National Irish Bank, said the current rate of decline in retail sales was the fastest in the last quarter of a century.

“2009 promises to be a very difficult year for retailers, given the scale of the slowdown in spending. While retail sales are falling in most European countries, the rate of decline in Ireland is relatively fast, along with Spain, Estonia and Latvia.”

He said consumers are increasing their precautionary savings as the economic outlook continues to deteriorate. On a more positive note he said the rapid fall in interest rates would increase household purchasing power.

Dr O'Toole also identifying one mitigating factor which might contain the extent retail sector job losses.

“The number of shop workers in Ireland is small relative to most European countries. For example, for every three retail/wholesale workers in Ireland, there are four in the UK, when adjusted for economy size. This may help explain why there have been numerous announcements of closures of UK chains in recent weeks, a trend that has not been as pronounced in Ireland.”

Rossa White, economist with Davy Stockbrokers, said the sales trend were following an expected pattern. Pharmaceutical and medical goods sales rose 2.9 per cent in the month and is the only category that has increased over the last 12 months, he said, while food, beverages and tobacco are next best, although they were down 4 per cent year-on-year.

The hardest hit sectors were those with anything related to housing, followed by discretionary items, Mr White said. Furniture, electrical goods and DIY equipment are all down by between 16 per cent and 26 per cent over the last year.

Alan McQuaid, economist with Bloxham stockbrokers, said there is “clear anecdotal evidence that there has been a mass exodus of Irish consumers across the Border in recent months to avail of cheaper prices in the North in response to a favourable exchange rate and the British government’s recent decision to lower VAT.”

He said while the Government can do little about weak sterling there was a strong argument for reversing the VAT move which could be incorporated into the Government’s plan to shave €2 billion off its spending programme for this year.

“It is quite clear that Irish consumers are concerned about future economic prospects, the fall out from the weak housing market, financial market turbulence and a general increase in economic uncertainty, and are looking at shopping where the prices are the cheapest.”