Sterling plunge over Brexit hits new car sales

The drop in the value of sterling because of Brexit is weighing on the purchase of new cars but spending in many other areas of the economy appears to be holding up, the latest retail spending figures suggest.

The CSO figures showed headline retail sales for February fell 0.5% in volume terms from January but were still up 1.1% from February 2016.

Underlying sales figures, which exclude car sales, rose strongly, with volume sales rising 1.1% in the month and climbing 5.9% from a year earlier.

Only three of 13 categories of retail sales spending showed annual decreases in February, the figures show.

Dermot O’Leary, chief economist at Goodbody, said that uncertainty over Brexit does not seem to be weighing to any major extent on the Irish economy as core retail sales have picked up pace in the opening months of the year after showing some weakness in late 2016 because of the weakness of sterling.

Mr O’Leary said that sales of new cars are down slightly but that overall effect on Government revenues may be limited. “While confidence has been somewhat volatile in recent months, solid growth in employment and earnings continues to drive Irish consumer spending higher,” he said.

Alan McQuaid, chief economist at Merrion Capital, said that despite the slowdown in the growth in new car sales that spending overall is likely to increase this year, but not at the rates posted through 2016.

The drop in the value of sterling had helped lure shoppers North, while household debt and Brexit concerns will also weigh. That will likely lead to a “cautious spending” outlook for the rest of the year, Mr McQuaid said.

David McNamara at Davy Stockbrokers, said though sales of new cars in Ireland had “been dampened by a sterling-induced surge in imports the underlying retail data are more instructive”.

“The data suggest that Irish households continued to increase spending at a robust pace in the first quarter and that consumer spending will continue to be a key driver of GDP growth this year,” he said.

The CSO said that in value terms retail sales fell 0.3% in February from January 2017 and fell 0.9% from February 2016. If Motor trades are excluded, there was an increase of 1.2% in the value of retail sales in the month and an annual increase of 3.3%, it said.