Slump tames ‘animal spirits’ of consumers

SHOPPERS’ “animal spirits” are being tamed by increased taxes, job losses and wage concerns, according to Friends First chief economist Jim Power.

The value of Ireland’s retail sales fell 1% in November from October and was 2.6% higher year on year, provisional figures from the Central Statistics Office (CSO) showed yesterday.

The CSO revised its provisional October figure downwards to show a 2.6% decline, from a provisional 2.3% fall, and a 3.9% year-on-year increase from an estimated rise of 4.1%.

Annual sales growth has fallen back from a 16.2% peak in December 1999 as the global downturn undermined Ireland’s buoyant economy.

Commenting on the figures, Mr Power pointed out that the volume of retail sales increased by 11.9% in 2000, 3.1% in 2001 and is likely to have increased by around 1.9 % in 2002.

“Despite what the eternal optimists on the Irish economy claim, by any standards there has been significant dampening of the ‘animal spirits’ of the Irish consumer over the past couple of years and they continue to dampen.

Anecdotal evidence suggests that pre-Christmas spending was down on the previous year, but that the post-Christmas sales have been quite strong.

“If this is correct, it is indicative of a consumer that is starting to hurt and that is becoming much more cost conscious. Heavy successful price discounting is always a sign of a weaker and consequently more price-sensitive consumer.

“This is not terribly surprising given the trend in the global and domestic economy, and the global and domestic equity markets over the past couple of years,” he said.

Mr Power said the more cautious consumer behaviour is to be welcomed, given the extreme uncertainties that still persist and that are being compounded by the ongoing appreciation of the euro