Spending continued to rise in February

Consumer spending continued to rise in February (when measured on a year-on-year basis) with retail sales volumes up by 5% compared with the same month last year.

The figure, published yesterday by the CSO, follows on from an 8.5% year-on-year jump in sales volumes noted in January, which qualified as the largest annualised volume increase in almost a decade.

February’s annualised rise was shortened to 2.3% when motor sales are excluded. In value terms, February saw a year-on-year increase of 2.9%.

However, the downside of yesterday’s data was the monthly change.

Where January’s figures also showed a month-on-month increase in sales volumes of 2.3%; there was no such boost in February, with monthly sales declining by 1.5% (0.4%, if motor sales are excluded).

The value of retail sales fell by 1.9% in February, when compared with January.

Clothing and fuel benefited from the biggest volume increases last month, while the biggest decreases were seen in car sales, electrical goods and food and tobacco sales.

The latest figures were weaker than expected, according to Alan McQuaid, chief economist with Merrion Stockbrokers.

“The main factor impacting negatively on consumer demand has been the continued net decline in real disposable incomes, an increasing tax burden and an erosion of transfer income.

“As well as that, the personal savings rate has remained elevated as households have striven to reduce their high level of indebtedness and to adjust to a sharp fall in personal wealth,” he said.

However, he said the state of the labour market will be a key issue, going forward, and current encouraging signs suggest that improving job figures will result in consumer spending contributing positively to the economy for the first time since 2010, this year.

While judging February’s data to be disappointing, Juliet Tennent, and economist with Goodbody Stockbrokers, said that retail sales remain on track for modest growth, with widespread discounting having a positive effect on volumes.

“Broader drivers such as employment and consumer confidence have improved of late, suggesting that there may be upside risks to consumer spending forecasts in the short-term.

“Despite a weak start to the year, we still believe that this is the case, but the scale of upside surprise is likely to be modest in the context of a high debt overhang and further fiscal austerity measures such as the payment of the full property tax,” she said.