Retail sales show first fall in 4 years

A sharp fall in car sales has contributed to the first drop in retail sales volumes for four years, according to data released by the Central Statistics Office today.

It said retail sales fell 1.9 per cent in February compared with the previous month, bringing the annual rate of growth to -0.1 per cent.

The volume of motor sales dropped by 4.2 per cent in February and by 4.5 per cent over the 12 months since February 2007.

Other product categories to show a sharp fall in sales were electrical goods, which saw a 5.4 per cent fall and food, drink and tobacco products, which were down 3 per cent. Shoe sales fell by 4.8 per cent in February.

According to the CSO, the value of retail sales fell 1.3 per cent in February although this still left the annual growth in sales value remains up 3.2 per cent.

Fergal O’Brien, senior economist with Ibec, the group that represents Irish business, said although retail sales activity has undoubtedly weakened over recent months, “the headline figure for February probably exaggerates the situation faced in the high street”.

“When cars and bars are excluded from the data, core retail sales increased by 3.3 per cent in February, and this was down slightly on the 3.8 per cent increase in January. Sales in supermarkets and of clothing remain reasonably strong.”

But Alan McQuaid, economist with Bloxhams stockbrokers said the “bottom line is that these figures are very disappointing, and suggest that consumer spending growth this year will be a lot weaker than previously thought.”

This, combined with weaker construction activity, pointed to a “hard landing” for the economy this year, with average GDP growth this year of less than 2 per cent, which is well down from last year’s 5.3 per cent.

“We already know that car sales were again extremely weak in March, so there is every chance that we will get a negative year-on-year growth rate again in total sales in the final month of the opening quarter, and the index excluding motor trades could well be in negative territory as well.”

He said a “persistently negative trend in consumer sentiment” has now carried over into a deceleration in personal spending. Based on these figures “one can’t . . . rule out Irish GDP posting a negative growth rate in the coming quarters”, he said.

Ulster Bank economist Lynsey Clemenger said the data was evidence that “slower employment growth, weak consumer confidence and continued negative news on the international front are feeding through to consumer spending”.

She said pubs had seen another weak month with sales falling 0.2 per cent, to leave the annual rate of change at -5.3 per cent, due to “significant price increases in the sector and changing social behavioural patterns”.