Consumer spending set for sharp decline

Consumer spending remains on course for another sharp decline this year, on the back of downbeat retail sales figures.

First estimates for May, published yesterday by the CSO, show a month-on-month decline of 0.1% in the volume of sales, but a 2.1% year-on-year fall. In value terms, May saw a 0.4% fall in comparison to April, but a 1.5% dip when measured on a year-on-year basis. The largest monthly declines were seen in the areas of bar sales, cars, electrical goods, and newspaper and book sales.

Dermot O’Leary, chief economist with Goodbody Stockbrokers, said: “The most important driver of consumer spending will be disposable income, which, in turn, will be driven by employment, earnings, and taxation. While we will, undoubtedly, see fluctuations on a monthly basis, the outlook for consumption is weak in Ireland for the next two years at least. In the short term, continued uncertainty about the external environment is also likely to keep precautionary savings high.”