Retail growth slows as OECD trims outlook for Irish economy

New CSO figures suggest the Brexit-driven sterling slump is finally affecting the pace of growth in retail sales here, as the Organisation for Economic Co-operation and Development (OECD) think tank trimmed its outlook for the Irish economy.
Retail growth slows as OECD trims outlook for Irish economy

CSO figures for October showed a slowdown in the volume of sales from the heady growth rates posted earlier in the year.

David McNamara, a senior economist at Davy Stockbrokers, said the slowdown could have been caused by consumers spending money online to cash in on the benefits of the currency following the UK vote in June to quit the EU.

The CSO measures all sales of retailers, including their online sales, based in the Republic. Purchases made through overseas-based online retailers used by consumers here are not accounted for in the figures.

Sterling had slumped as low as 90 pence against the euro in early October, down from 76 pence on the eve of the UK vote. It has since rallied to 85 pence, though even that represents a huge slide from the level of 69 pence this time last year.

The CSO figures show that by volume, retail sales fell for the third successive month in October. Excluding car sales, the annual growth in underlying retail sales dropped to 3.8% and 3.4% in October and September from around 6.5% at the start of the year. And underlying sales measured by value show only modest annual increases of 1.8% and 1.5% in October and September, also down sharply from the start of the year.

Mr McNamara said that the softening in growth can be linked to the drop in the value of sterling following the Brexit vote, even though there may be some relief for retailers leaking sales online and to the North as the currency has come back to 85 pence in recent times.

“The retail sector has weathered [the currency] before,” he said.

The amount the Government takes in from Vat receipts has missed its own performance targets this year well before the Brexit vote, so untangling any potential Brexit-led dampening on Vat revenues may not be known until much later.

By types of retailer, three sectors were performing relatively well in volume terms over a longer time frame. By volume, sales of furniture and lighting were up 11.8% in the three months to the end of October from the same period in 2015, electrical goods are up 7.9%, and motor sales continue to drive ahead, up 6.6% in the same period.

Sales at bars were up 2.8%, but books, newspapers, and stationery were down 2%.

Meanwhile, the OECD trimmed its Irish outlook, as exports and investment growth slows because of Brexit.

It projects GDP will expand 4.3% this year, then slow to 3.2% and 2.3% in 2017 and 2018.

“The Brexit referendum result is already affecting the Irish economy, for example, business confidence has declined,” the Paris-based think tank said. “Indeed, Ireland is the country that could be the most affected by the Brexit negotiations and the outcome of the process.”

Its assessment on the budget was broadly favourable. The OECD sees the potential for Government to increase spending “to support growth in the face of shocks from Brexit or some other source that threaten to derail the economic expansion”.

Alan McQuaid, chief economist at Merrion Capital, said retail sales could still grow strongly this year.

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