The drop-off followed a 13.8% spike in July as consumers splashed out on new vehicles heading into the second half of the year.
Despite the negative headline figures contained in yesterday’s Central Statistics Office (CSO) data release, retail sales actually rose by 0.9% in August when motor sales were excluded.
This reversed a trend seen over the previous two months when underlying sales (those excluding the motor industry) declined.
Davy Stockbrokers chief economist Conall Mac Coille said the figures merely continued the trend of volatile data seen this year.
“At face value, today’s retail sales data show a substantial 4.7% fall in August — albeit after a 13.8% rise in July — but are still up 5.2% year-on-year. However, car sales explain the extraordinary volatility in recent months.
“The Central Statistics Office’s seasonal adjustment does not capture the new pattern of car sales due to the 162 plate. This means sales peak in July but then start to fall back,” Mr Mac Coille said.
The sectors with the largest monthly volume decreases in August were motor trades (11.1%); bars (2.7%) and department stores (1.1%).
Meanwhile, the sectors with the largest monthly increases were furniture and lighting (8.8%); other retail sales (5.1%) and hardware, paints and glass (4.6%).
Analysts agreed that the fundamentals of the economic recovery remained sound and would continue to drive an incremental but increasingly broad-based pickup in consumer spending despite the fallout arising from the UK’s Brexit decision in June.
“Although retail sales remain erratic on a monthly basis, the underlying trend is still positive… personal spending in other areas has generally picked up in recent months and is becoming more broad-based. This can only be good news for retailers and employment prospects in the sector.
“Consumer confidence hit a 15-year high in January but has dipped since, mainly on uncertainty over the Brexit referendum. Still, overall, spending was quite robust in the first eight months of the year, with headline sales up 7.2% year-on-year on average in volume terms,” said Merrion Stockbrokers chief economist Alan McQuaid.
The Merrion analyst warned against complacency, however, with the weakening of sterling likely to have a negative impact on UK tourist spend in the second half of the year.
Consumer sentiment — and by extension personal spending — will also have to weather the uncertainty Brexit has caused while a sharp fall in the pound could increasingly entice Irish shoppers across the border.
Still, Mr McQuaid is projecting full-year retail sales growth of between 6.5% and 7% in 2016 — down slightly on last year’s 8.2% increase.
The Irish Small and Medium Enterprises Association (ISME) called on the Government to offset recent wage increases by reducing employers PRSI, in the light of yesterday’s figures.
“Budget 2017 is an opportunity for the Government to inject a much needed boost into the retail sector; the Government must fulfill its pledge to cut employer PRSI contributions for low income workers,” said ISME chief executive Mark Fielding.