Shoppers likely to start buying again after VAT cut and scrappage scheme

SHOPPERS are likely to start buying again following favourable announcements in the budget but retail sales still remain weak.

The volume of Irish retail sales fell 9.1% in October compared with the same month last year. Sales, excluding cars, dropped 6.7% from a year earlier, figures from the CSO showed. From the previous month sales fell 1.7%.

All sectors showed year-on-year volume falls, with the most significant declines being motor trades down 24.1%, supermarkets down 3.1%, clothing, footwear and textiles down 6.8%, bars down 8.2% and household equipment down 11.7%.

The value of retail sales plunged by 13.9% in October compared with the same month last year and was down 0.6% in the month. If motor trades are excluded, the annual decline was 12%, with sales down 1.6% on September.

The budget changes of a cut in excise duty on alcohol, the introduction of the car scrappage scheme and the reversal of last year’s half percentage hike in VAT should boost overall consumer expenditure in 2010 despite the likely negative impact on spending by the reduction in public sector wages and the cut in some social welfare allowances, according to Bloxham analyst Alan McQuaid.

“Furthermore, the fact that income taxes weren’t increased further should raise the spirits of the majority of consumers,” he said.

Mr McQuaid said that the stimulus measures announced in the budget should be enough to boost spending next year “especially as anecdotal evidence would tend to suggest that there is still plenty of money out there in the economy despite the recession”.

He said the announcement of a car scrappage scheme is welcome.

“Psychologically the lift given to consumers will be huge, especially come January if there is a clear sign on the roads of a big pick-up in new registrations,” he said.

Bloxham is forecasting an overall decline in personal spending on goods and services next year of 1.8%.


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