25,000 jobs at risk as spending plunges

SPENDING on clothes, furniture and cars has plunged by record levels as a growing band of shoppers opt to pay off debt rather than splash their cash.

And the group representing the country’s retailers predicted yesterday that 25,000 jobs will be lost in the sector if the decline continues.

Retail Ireland director Torlach Denihan said “We project 25,000 more retail staff will go on the Live Register this year, as a result of consumer spending falling by about 9%.”

New figures from the Central Statistics Office (CSO) also show that with stores discounting heavily, the value of sales has fallen by 19% over the year.

Spending at pubs has also declined by just over 11% over the past year.

Retail sales as a whole fell 15% in May as compared with a year earlier, a clear sign shoppers are struggling with declining incomes.

When the 40% annual drop in car sales is excluded, annual retail sales in May fell by a record 9%.

Clothes sales plunged by 17%, while furniture sales dropped a massive 31%.

Bloxham economist Alan McQuaid said when economies suffer, consumers tend to rebuild their balance sheets by increasing savings and paying back debt rather than spending.

“There is no reason why it will be any different this time round. Indeed, it is hard to see spending picking up significantly and on a sustained basis until consumers are more confident that the economy, and the labour market in particular, has stabilised.”

Mr McQuaid said personal spending should remain in negative territory for most of this year and when it does recover, it is likely to be subdued for some time.

Irish household debt has been rising over the past 15 years. In 1995 it stood at 48% of disposable income but by the end of last year it is estimated to have risen to almost 180%.

“Higher debt enabled personal expenditures to grow faster than disposable income, providing a significant boost to economic growth. However, such a trend cannot be sustained and has now gone into a dramatic reversal,” he said.

Retail spending will not return to 2007 levels until 2017, according to NCB Stockbrokers, which said the retail environment in Ireland will remain “extremely challenging” in the coming years.

Predicting massive retail job losses unless there is a turnaround, Mr Denihan said consumers responded to a fall in disposable incomes by spending less than last year.

“Sales of electrical goods, furniture and other items linked to the property market have been down by double-digit percentages for several months and clothing sales are now suffering similarly. Consumers are pulling back from discretionary purchases,” he added.