Consumer spending grows at fastest rate in seven years

Consumer spending volumes grew by over 6% during the first half of 2014 — the fastest rate for seven years — fuelling expectations of a jump of between 1% and 2% for the full year.

Commentators yesterday brushed off disappointing monthly retail sales figures, suggesting they masked the truer, more positive, picture.

The new monthly provisional CSO data shows that — in terms of volume — retail sales fell by 1.7% in June, compared to the previous month; but were up by 3.6% on a year-on-year basis.

Value-wise there was a monthly decline of 0.3%, but an annual rise of 3.3%. Excluding motors, the volume of consumer purchases rose by 3.6% year-on-year, while the value was up by 2.1% and 0.1% on a month-by-month basis.

According to Conall MacCoille, chief economist with Davy Stockbrokers, June’s monthly decline is “artificial”, with strong car sales already noted for July likely to lead a strong recovery in retail sales.

“Sales volumes were up 6.5% in the first half of the year, and while this reflects buoyant car sales, they are still up by a robust 3.4% excluding motor trades.

“The strong growth in retail sales in the first half should translate into a pick-up in overall consumer spending as the year progresses, with growth of around 1.5% in 2014,” he added.

Alan McQuaid of Merrion Stockbrokers added that this year should see consumer spending make a positive contribution to GDP growth for the first time in five years.

While sales volume increases were noted in 10 out of 13 categories measured by the CSO, Goodbody Stockbrokers’ Juliet Tennent was less effusive; noting that while positive property price movements and employment trends are aiding a recovery in consumer confidence, “the large debt burden carried by Irish households will, ultimately, curb spending”.