New car buys boost retail sales to 10-year high

Car sales, boosted by the recent introduction of the ‘152’ registration plates, drove retail sales volumes up nearly 12% last month reaching a 10-year high in the process.

Latest data, published yesterday, by the CSO shows consumer spending volumes soared 11.6% in July and by 9.9% yearly.

If motor sales are excluded from the equation, July saw a monthly rise of 0.6% in sales volume and of 6.6% annually.

The actual value of retail sales rose 9.4%, in July, when compared to June and jumped 6.5% on an annualised basis.

While car sales massively skewed the July figures, up nearly 23% on the month and by far the largest single sector rise, commentators remain largely upbeat about the long-term recovery in consumer sentiment and spending activity, as the vast majority of sectors showed growth in the latest data.

While there was a drop in sales volume for items like food/ beverages and tobacco; books and newspapers and hardware products; items like electrical goods, furniture and spending in pubs and bars grew, the latter by 11% and at the fastest rate for a decade.

The return of customers to pubs shows, according to Goodbody Stockbrokers’ chief economist, Dermot O’Leary that discretionary spending is rising again.

“The combination of gains in employment and earnings, and rising consumer confidence is confirmation that the Irish consumer remains in a sweet spot,” he said.

On the motor trade front, Mr O’Leary suggested “the growth in this big-ticket area is a confirmation of the improvement in consumer confidence and belief about the sustainability of the recovery in the labour market.”

Davy Stockbrokers said it expects to raise its forecast for consumer spending growth this year from 1.8% to above 3%.

“These data reinforce the picture of a strong rebound in Irish consumer spending in 2015. In the first seven months of the year, retail sales volumes expanded by 9% and by 5.7%, excluding motor trades.

“The strong expansion has been driven not only by employment growth, but also by the pick-up in private wage growth to 2.4% in the second quarter,” according to Davy’s chief economist Conall MacCoille.

Chief economist with Merrion Stockbrokers Alan McQuaid is hopeful of retail sales rising by 7% to 9%, this year, on a headline basis; with core sales, which strip out car purchases, to grow by 4% to 6%, which he said would augur well for strong GDP growth again in 2015.

“We think GDP will be up 5% to 6%, in real terms, putting Ireland once more well ahead at the top of the eurozone growth league table,” he said yesterday.

“Although retail sales remain erratic on a monthly basis, the underlying trend is positive. While most attention has been on cars, personal spending in other areas is picking up too and is becoming more broad-based.

“This can only be good news for retailers and employment prospects in the sector,” he said.

Retail Ireland, the Ibec- affiliated industry representative body, said the October Budget poses an opportunity to cement the recovery in sales, via income tax reductions.

“Overall the performance of the retail sector during July has been positive. It’s crucial that this momentum is not lost,” said Retail Ireland director Thomas Burke.