Greed ‘to blame for drink sales dip’

Conor Keane, Business Correspondent

Goodbody Stockbrokers economist Dermot O’Leary said retail sectors like food that have kept a lid on prices have been rewarded with increased sales volumes. The Retail Sales Index, published yesterday by the Central Statistics Office, show consumers splashed out on new cars in January, driving sales volumes up by 5.3%.

Despite car sales of close to 27,000, retail sales excluding cars were up 3.8% in the year to the end of January.

Commenting on the detail of the results, economist Dermot O’Leary said the downward trend for bar sales seems to have continued where it left off in 2004. Drink sales by value fell 1% in January.

“Bar sales volumes fell by 4.5% (6.1% by value) on average in 2004.

While publicans will claim that this was mainly due to the ban on smoking in the workplace, the fact remains that bar sales volumes were on a downward path long before this time. For example, bar sales volumes fell by a similar amount in 2003. “It is our belief that the excessive inflationary pressures witnessed over the past few years are the primary reason for the falloff in bar sales volumes,” he said.

Mr O’Leary said that it is interesting that the areas which are displaying the least amount of price increases are experiencing the most impressive rate of sales growth.

“This is most apparent in the food area, where sales are ahead by 5.4% year-on-year. Given the increased price sensitivity of the Irish consumer observed over the past few years, this strategy was the correct approach to take in driving retail sales growth forward,” he observed.

Irish Life Investment Managers head of asset allocation Eugene Kiernan said consumer confidence numbers stumbled recently and despite a robust jobs market and generally upbeat economic forecasts, the consumer is somewhat late into the fray. “Issues behind this timidity may include the high level of services inflation which may be playing on consumer psyche.

“There is also a growing trend of a lot more of consumers’ income gains being spent abroad. Cheaper fares and a solid domestic economy have seen an increase of over 10% per annum in the last three years in our holiday spend,” commented Mr Kiernan.