February car sales fall by a massive 53%

A MASSIVE 53% fall in the amount of car sales conducted in February, dragged total retail sales down by just under 21%, on a year-on-year basis, according to new figures published yesterday by the Central Statistics Office (CSO).

The figures – following on from a 26.6% annualised fall in January – have unsurprisingly led to dire forecasts for the rest of the year.

One economist – Deirdre Ryan of Goodbody Stockbrokers – said we are likely to witness a 9% decline in overall consumer spending for 2009.

“Given that the latest data only captures the opening two months of the year and the macro backdrop has deteriorated further in the period since, continued weakness in retail spending is in store in the months ahead,” Ms Ryan said. “Unemployment has continued its relentless trek upwards, albeit at levels slightly below that seen in earlier months. In addition, some very stern budgetary measures will take effect at the end of this month which will further impact disposable income.”

Retail Ireland – the IBEC-affiliated industry representative body – was in broad agreement with the full-year estimate and took advantage of yesterday’s CSO numbers to renew its call for a reduction in the 21.5% VAT rate.

“The impact of the two budgets will reduce consumer spending by an estimated 9%. To combat this and to safeguard both revenue and employment, the Government should implement a targeted reduction in VAT for a specific period of time to stimulate retail sales and reduce costs on the retail sector that Government directly controls, such as commercial rates, waste disposal and electricity,” according to Retail Ireland director Torlach Denihan.

While carrying on a trend seen throughout last year, the heavy declines in consumer spending in the first two months of this year were far heavier than anything seen during 2008. While every month last year (bar January) saw an annualised percentage fall in retail sales, only once did that figure reach double figures – November’s 10.1% decline.

Apart from the deterioration in motor trades, yesterday’s CSO figures for February also showed year-on-year declines of over 13% in department store spending volumes, a near 12% drop in fuel sales, a 22% fall in furniture sales volumes, a 14.3% deterioration in hardware/paint sales and an 11% fall in the volume of spending in pubs and bars.

“The improvement is certainly welcome. However, with the employment situation set to deteriorate further and spending to remain depressed for the foreseeable future, it will be some time to come before any credible “greenshoots” emerge in Ireland,” said Ulster Bank’s Lynsey Clemenger.