Consumer confidence to drive headline sales by 7%

Headline retail sales grew by 6.3% last year and are expected to increase by another 6%-7% during 2015, as consumer confidence and disposable income continue to recover.

New CSO data, published yesterday, show the volume of consumer spending increased by 0.5% in December, when measured on a monthly basis, and was up by 5.1% on a year-on-year basis (4.8% when motor trades are excluded from the figures).

December’s value of sales fell by 0.1% when compared to November, but rose by 2.3% when measured annually. The 6.3% rise in overall retail sales volume last year was up from a low base of a 0.7% rise in 2013.

Alan McQuaid, chief economist with Merrion Stockbrokers, said the rise in headline sales could be as much as 7% this year.

“Overall personal expenditure on goods and services for 2013, as a whole, was negative again, falling by 0.8% in real terms — the fourth drop in the past five years. But, buoyed by an improving labour market, consumer spending last year, for the first time since 2010, made a positive contribution to GDP growth, with an estimated increase of around 0.8%. A stronger rise, of 1.5%, is projected for 2015, with retail sales again likely to be well up on 2014,” he said.

Dermot O’Leary, of Goodbody Stockbrokers, noted the “tentative return of the Irish consumer”, but said retailers have had to cut prices aggressively to achieve the volume growth.

“This growth is coming off a low base and increases in trade remain modest, when the huge fall in the value of sales over the period 2007-2013 is considered. The retail sector suffered disproportionately during the crash and its recovery has lagged behind the general domestic economy. Legacy costs continue to hamper growth for many retailers and have the potential to destabilise the recovery. The value of core retail sales remains some 17% below its pre-crisis peak and this reflects the challenging business conditions which many traders still face,” added Thomas Burke, director of the Ibec-affiliated industry representative body, Retail Ireland.

“We must address unsustainably high rents and disproportionate local authority rates if we are to achieve growth,” he said.