Decline in consumer spending continues

CONSUMER spending volumes continued to fall in March, following the first monthly fall in more than four years being recorded in February.

Yesterday’s latest set of monthly retail sales figures, published by the Central Statistics Office showed that the volume of sales fell in March by 2.1% on a year-on-year basis and by 1.8% on a rolling month-by-month basis from February. The figures exclude car sales — and with them not included there was an annual 1.2% rise and a monthly fall of 1.1%.

The value of retail sales in March did, however, rise — by 1.4% in an annual and monthly context. The largest area of increase in sales volumes in the three-month period between December and February was in the department store sector — with a 4.9% rise seen on a rolling quarter-by-quarter basis — while the largest decrease (2.6%) was seen in the “other retail sales” category.

There were monthly falls in the volume of sales in areas like electrical goods, clothing and furniture but rises in food and beverages and footwear.

“Irish consumers are getting hit on two fronts in particular — as evidenced by the sharp increase in the live register in the first quarter, the labour market has weakened and higher inflation is eroding real disposable income. These are real headwinds that are unlikely to go away soon. We recently revised down our forecasts for economic growth due to lower consumer spending estimates,” said Dermot O’Leary, chief economist with Goodbody Stockbrokers.

Rossa White of Davy Stockbrokers also highlighted the “triple whammy” for Irish consumers of softer labour market conditions, tighter credit and higher inflation but added: “The unusually early Easter has played havoc with Irish statistics already, based on previously reported data for March. As the lack of trading days in March probably exaggerated the decline, there may be a partial rebound in April.

“The policy blunder of raising road tax and phasing in unclear VRT (vehicle registration tax) changes, in the face of a slowing income climate, has dented consumer spending in 2008.”

For the first quarter, on a whole, the volume of retail sales fell 0.2%, but it did, nonetheless, mark the first three-month decline since the middle of 2003.


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