Retail sales up 1% on back of strong car sales

SALES in the retail sector rose 1.3% in August compared with the same month last year, boosted by higher car sales in particular, while clothing and footwear were also ahead.

CSO figures show a month-on-month increase of 1.1% after three months of lower sales.

Cars and other vehicle sales were up 5.5% over July, with department store business ahead by 4.6%.

The CSO figures also show that demand for cosmetics and pharmaceuticals rose by 3.2% in August.

When the motor statistics are stripped out, the retail sector shows a decline of 1.4% year-on-year, while the figures showed a month- on-month increase of 0.2%.

Measured over 12 months, motor sales showed a strong increase and were up 20.4%. Over the same timeframe clothing and footwear rose by 1.4%. Elsewhere, sales of furniture and lighting items fell by 10.4%, while bar sales were down 0.6%.

The value of sales, taking prices into account, was up 1.3% in the month but down 1.7% over 12 months.

Ulster Bank said the August figures proved more resilient than expected given the continuing retail sales weakness experienced in the preceding three months.

“At the time of the July numbers we noted that the outlook for total retail sales in the third quarter didn’t look great, with the July index running 0.6% below the Q2 average.”

The situation looks better for the period ahead following the August numbers, “with sales looking as though they will be flat to modestly positive in Q3, with the latter dependent on a modest monthly increase in total retail sales in September,” said Lynsey Clemenger, an economist, with Ulster Bank Capital Markets. “That projection looks reasonable following the slight improvement in the labour market situation in the month,” she said.

She warned that uncertainty surrounding the budget and the need to cut government spending may mean consumers remain circumspect and continue to save rather than increase their spending.

“While we welcome the better tone to the August retail sales data, this follows a clear trend of renewed weakness in the preceding months,” she said.

Given overall consumer spending failed to record a quarterly rise in Q2, the annual average decline in 2010 will be greater than the 0.1% previously forecast by the bank, she said.

“As we look ahead to next year, the lack of any notable improvement in the labour market situation will limit the extent of the recovery in consumer spending.

“Indeed, the possibility of further tax increases in future budgets is an additional factor that could work to constrain consumers’ willingness/ability to spend,” said Clemenger.