Retail sales volumes decrease by 1.9%

Retail sales were sluggish in February, according to Ulster Bank.

This was further evidence that slower employment growth, weak consumer confidence and continued negative news on the international front were feeding through to consumer spending.

Retail sales volumes fell by 1.9% in the month, the largest monthly drop since May 2006. This brought the annual rate of change into negative territory for the first time in more than four years.

The final figures for January 2007 were also revised down to a flat monthly change from 0.9%.

Motor trades acted as a significant drag on the retail sales in February, falling by 4.2% in the month. As a result, excluding motors, the monthly change was a more modest negative of 0.3%, and the annual rate of change remained in positive territory.

According to data from the Society of the Motor Industry (SIMI), car registrations fell sharply in February, decreasing by 10% on an annual basis. These figures are in line with the retail sales data on motor trades, which showed an annual decline of 4.5%.

The motor trades component of retail sales includes repairs and forecourt sales, which explains the discrepancy between the SIMI and Central Statistics Office figures.

SIMI figures for March showed a decrease of 23%, indicating that continued weakness in the motor trades is likely in coming months.

Bars had another weak month, decreasing by 0.2%, to leave the annual rate of change in negative territory at -5.3%.

This continued weakness is likely explained by a combination of factors, including the significant price increases in the sector and changing social behavioural patterns.

Clothing and footwear were also weak in the month, decreasing by 1.6%.

Although the annual rate of increase remains in positive territory, it dropped to 2.4%, from 6.9% in January. This represents the slowest annual rate of increase in any given month since August 2003.

Prices in clothing and footwear remain in negative territory, falling by almost 3% in February.

Food businesses posted increases in volumes, up by 1.1% on the previous month, which may appear somewhat surprising given the pace of price increases in the sector.

However, it is important to point out spending on food is non-discretionary, therefore one would expect demand to be generally stable compared with the non-food sector, and less sensitive to economic cycles.

Overall these figures indicate a weak start to 2008 in terms of retail sales, stated the Bank’s economic unit.

On average, retail sales volume increased by 6.4% in 2007.

Given monthly data such as the 1.9% annual rate in January and -0.1% in February, the report surmised, the cool down in retail sales particularly evident in the final quarter of 2007 is set to continue in coming months.

Article courtesy of the Evening Echo newspaper.