Consumer spending growth has eased to its slowest rate for nearly three years, CSO figures show, heightening fears the post-Brexit referendum fallout is biting deeper into the Irish economy.
The CSO yesterday issued provisional retail sales figures for September, showing a monthly fall in volumes of 0.2% and a year-on-year increase of 3.8%.
The latter figure, if upheld, would represent the lowest level of sales volume growth since November 2013. On a value basis, retail sales dipped by 0.4% in September on a monthly basis and were up by 1.9% year-on-year.
Conall Mac Coille, chief economist with Davy Stockbrokers, noted motor sales heavily skew the data but said the current weakness in sterling is, undoubtedly, also having a negative effect.
“Some of the weakness reflects the new seasonal pattern of car sales distorting the headline data. After a 14.5% surge in July, sales volumes have fallen 6% in August and 0.2% in September,” he said.
“Excluding motor trades, sales grew by a healthy 0.5% in September, up 3.3% on the year."
“However, the pace of spending growth has softened from the 6.2% rise in calendar year 2015. Retail prices fell by 0.6% in September after a 0.5% fall in August.
"This suggests that sterling’s depreciation against the euro is bearing down on consumer prices, with the UK accounting for close to 33% of imported consumer goods,” Mr Mac Coille added.
Goodbody Stockbrokers’ Dermot O’Leary said the latest retail sales figures provide further evidence of a negative Brexit effect on the Irish economy.
“Weaker trends have been in train in most categories, with the weakest being books and newspapers. As we noted in our report on cross-border shopping [published earlier this week] the impact may be small overall but bigger in certain sectors and Border regions.
"The slower trends may partly reflect these issues but may also be as a result of confidence issues associated with Brexit. Strangely, the impacts appear larger than the impact on the UK consumer to date,” he said.
Business costs, according to small firms lobby group Isme, are still the main issue threatening real growth in the economy.
“High costs in rents, local charges and insurance are undermining the great potential the SME sector has to offer. If these were reduced, SMEs would be in a better position to create employment; putting more people back to work, and more money back in people’s pockets, and the local economy,” said Isme chief Neil McDonnell.
In a busy day for the CSO, latest manufacturing output data was also published yesterday. This, too, made for uneasy reading – with industrial production up by 6.8% on a monthly basis (albeit after a near 13% monthly fall in August) but down by 1.5% year-on-year.
The domestic economy-focused so-called ‘traditional’ sector seems to be taking the brunt of the downturn.
“Given that close to 40% of exports in traditional manufacturing are destined for the UK market, it is not surprising to see output in this sector struggling...Sterling is also weighing on Ireland’s manufacturing sector,” said Mr Mac Coille.
Alan McQuaid – chief economist at Merrion Stockbrokers – added the prospects for Irish industrial output aren’t great: “All the signs are that any rise in 2016 will be significantly lower [than recent years], and the risk now is that the overall change will be negative.”
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