Record fall of 14% in retail sales

RETAIL sales plunged a record 14% in 2009, in what was the worst year ever for a sector, crippled by job losses and falling sales.

The volume of consumer spending fell sharply during the course of 2009, reversing the increases of the previous three years and bringing personal expenditure back to 2005 levels.

Stripping out motor sales, the volume of retail sales fell by 0.9% from November to December, bringing the annual fall in retail sales for the year to December to 6.7%. The 14% drop was the biggest in any year since records began in 1962.

The value of sales showed an even bigger fall of 18%. Retailers cut prices in an effort to boost activity.

Footfall on Grafton Street and Henry Street, two of Ireland’s busiest, in the final three months of last year show shoppers are still out in numbers but they are cautious and spending habits are still shifting, according to CB Richard Ellis.

Property economist with CB Richard Ellis, Patrick Koucheravy, said despite sale signs in the windows, Irish consumers were still very cautious about their spending as holidays approached.

Figures measuring consumer sentiment rose to a two-year high last month but Mr Koucheravy said he expects 2010 to be another difficult year, with interest rates likely to increase, meaning discretionary spending may be even further compromised.

The most significant falls in the volume indices were in the motor trade, which were down 15.1% and non-specialised stores such as supermarkets, which were down 3.5%.

Chief economist with Bloxham Stockbrokers, Alan McQuaid said: “The decline in consumer expenditure last year reflected the impact of contracting disposable incomes and exceptionally weak consumer confidence, which prompted an increase in precautionary savings.”

Although there are signs of improving consumer sentiment in recent months, which should provide some support for demand, the further erosion of disposable incomes arising from falling employment incomes and an increased tax burden, due to the carryover from 2009, will give little scope for increased consumer demand in 2010, said Mr McQuaid.

Bloxham is forecasting an overall decline in personal spending on goods and services this year of 1.8% in volume terms.

In December greater signs of stability were evident in sales of clothing and footwear, which rose by 1% from November. Sales of hardware, paints and glass were up 4.6% and sales in bars increased by 2.5%. However, given food has a significant weighting of almost 40% in core retail sales, the monthly decline in sales in this sector exerted significant downward pressure on volumes.

Retail Ireland director Torlach Denihan said it is vital the Government assist the retail sector to achieve reductions in its cost base.