Consumer spending levels dropped for the second consecutive month in February as the Government’s budget measures continued to alter household financial priorities.
CSO figures show that spending volumes fell by 0.3% last month, following a 4.1% decline in January.
On a year-on-year basis, February spending was down by 1.9%. In value terms, sales were down by 0.1% on a monthly basis and by 1.8% year-on-year.
Motor sales fell by nearly 3% in February, with similar spending falls in areas like furniture and bars — the worst hit area — although spending on electrical goods and in department stores rose quite healthily.
The latest data suggests that the relatively strong consumer spending patterns evident towards the end of 2011 were only temporary. Households likely brought spending forward into the fourth quarter of last year in order to avoid the Vat increase in the budget.
Chambers Ireland chief executive Ian Talbot said the Government must think about the consequences of increasing the top Vat rate to 23% and the resulting effect on consumer confidence and the retail sector.
"The ongoing softness in the retail sector is having a detrimental effect on the recovery of the domestic economy," said Mr Talbot.
The CSO figures also pointed to another bad year ahead for consumer spending and retailers.
Bloxham Stockbrokers chief economist Alan McQuaid said: "Overall, households are likely to remain in cautious mood for the immediate future, saving and paying down debt rather than spending in the shops. In our view, personal spending on goods and services will fall for the fifth year running in 2012, putting more retailers and service providers out of business as a result.
"The bottom line is that consumers remain under immense pressure, with stealth taxes announced in the December budget further set to eat into disposable income this year."
Retail Excellence Ireland has urged the Government to do more to help shop owners to reduce their cost base, with a reduction of local authority rates a top priority.
Davy Stockbrokers, meanwhile, said the figures were not a surprise and were consistent with its view that spending will contract by 1.7% this year.