Consumers hint the worst may be over

CONSUMERS, waiting to be hit by budget cuts, continued spending in April as retail sales increased.

When plunging car sales are excluded sales rose 0.5% in April from the previous month, according to figures released by the Central Statistics Office (CSO).

This was the first monthly increase since November.

Over the year retail sales were down 17% in April, led by plunging car sales and falling demand for furniture, electrical goods and clothes.

When car sales are excluded, sales fell 7.1% in April from a year earlier.

Furniture sales fell 38% from a year earlier, clothes sales declined 10% and sales at bars fell by 12%.

The volume of retail sales decreased by 17% in the year, mainly reflecting poor new car sales, which were 50% lower on an annual basis than in April 2008.

Alan McQuaid of Bloxham Stockbrokers said: “While consumer spending remains extremely weak by recent historical trends, and expenditure is now more discretionary, anecdotal evidence suggests that the public is still willing to purchase if they really want the good/service that is on offer, which is encouraging in itself for the long-term health of the economy.”

Mr McQuaid said while the Irish economy remains on a downward trend, the worst may be over.

The value of retail sales decreased by 20.5% in April compared with the same month last year and rose by 2.0% in the month.

If motor trades are excluded, the annual decline was 11.2%, with sales down 1.2% in the month.

Ulster Bank economist Lynsey Clemenger said as unemployment rises further and savings levels remain high, spending will likely remain in the red next year and subdued thereafter.

“Given consumer spending generally accounts for about 60% of total growth in the Irish economy, this will continue to retard growth going forward.”

Davy’s Rossa White said retailers continue to suffer a huge drop in revenue as prices are slashed to keep sales going. “For retailers, it is the value rather than the volume of sales that matters. The volume of sales outside garages may have picked up a touch in April, but the value continues to decline.

He added that June will be a big test when Budget tax hikes hit. “We will watch the June figures closely when they are released two months from now. That is when the tax hikes in the April Budget feed through.”