Spending spree is good news for retailers

IRISH consumers are on a massive shopping spree spending 8.3% more that they were 12 months ago, despite plunging €177 million a month into Special Saving Incentive Accounts (SSIA).

Central Statistics Office (CSO) figures released yesterday show Irish consumers spent 8.3% more in money terms in September than they did September 2001 and it not just inflation that is pushing up the value of sales as volumes jumped by 5.2% over 12 months.

The CSO’s provisional data indicates that Irish shoppers spent 6.1% more money in September than August, buying a massive 6% more goods by volume in September than in August, the biggest move since January 2000.

The spending splurge is good news for retailers in the run up to Christmas as it does not appear consumer sentiment is being damaged by a slowing of economic growth, Government spending cutbacks, rising unemployment and inflation running at 4.6%.

The largest increase in the volume of sales in the three months to August was in the pharmaceutical, medical and cosmetic articles sector up 3.6%. The largest decrease in the volume of sales was in the furniture and lighting sector down 2.4%.

Pharmacists were unable to identify any factors which may have contributed to the increase.

Year on year, overall retail sales volume was up 5.2% from the same month in 2001, the biggest increase for nine months. This compares with a fall of 0.5% in August.

IIB Bank chief economist, Austin Hughes said; “These numbers are extraordinarily strong, and out of kilter with evidence coming from tax revenues which show that while the economy is not collapsing, neither is an economic upswing underway.”

Mr Hughes did note the CSO had quite heavily revised the previous month’s provisional figures.

Sales on a three-month basis, which the CSO says gives a more stable indication of recent underlying trends, show a 2.3% increase compared with the same period in 2001.

The CSO adjusted its initial August figures to show a fall of 0.7% on July, from an estimated 1% rise, and a 2.6% year-on-year increase from an estimated rise of 4.3%.

“That would imply these numbers have an element of health warning attached, and I’d be cautious about drawing too heavily an inference that the economy is on an uptrend,” Mr Hughes said.

Alan McQuaid, chief economist at Bloxhams Stockbrokers, was also mystified by the strength of the numbers.

“If you strip out car sales they drop back a bit but it’s hard to know why consumers are spending money in the current climate,” he said.

Excluding car sales the monthly change in September was 3.3%, and the annual change 7.4%. In volume terms the stripped out monthly and annual figures drop to 3.3% and 4.5% respectively.

A Tesco spokesperson suggested shoppers might be buying for Christmas before expected increase in Finance Minister, Charlie McCreevy’s Budget 2003 on December 4.