Poor retail sales despite huge drop in prices

RETAILERS report poor sales and thousands of jobs are being lost despite prices plunging over the past year.

Latest figures from the Central Statistics Office show that over the past year food prices are down 6%, clothing is down 14% and footwear costs have fallen 13%. Consumer electronics are also down 15%, home computers down 25% and toys down 12%.

However, despite massive discounting, retailers said urgent government action is needed to encourage shoppers to start spending again.

Overall the annual rate of decrease crashed through the 6% mark after holding steady at 5.9% in August. Headline prices were down 0.4% in the month and 6.5% in the year in September.

Employers’ group IBEC said that while a sustained period of falling prices would be very damaging for businesses and the wider economy it does not believe that such a deflationary spiral will develop.

IBEC senior economist Fergal O’Brien said: “We are now in unprecedented territory in the post-war era in relation to price changes. This window of deflation will be important in protecting real living standards in the face of necessary adjustments to public expenditure and pay.”

Not all prices have fallen over the year. Smokers had to pay an extra 12% over the year for cigarettes, while cinema entry is up 1.4%. Package holidays are also up 5.4% over the year.

Alan McQuaid, chief economist with Bloxham Stockbrokers, said energy costs are likely to rise in the coming months as last year’s sharp oil price hikes exit the inflation calculations.

Small business group ISME said the Government must cut costs and resist any pay increase demands from the trade unions.

“There is absolutely no alternative but to seek reductions in public expenditure, including pay and numbers, with the deplorable state of the government finances.

“These reductions can be justified and offset by the current level of inflation and the Government needs to hold steady,” said ISME chief executive Mark Fielding.