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| Retail Sales - March 2011 |
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By
Lynsey Clemenger - Economist Ulster Bank
May 3, 2011 |
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Essentially flat overall retail sales in March disguises mixed performance in sub-sectors
Irish retail sales were essentially flat in March. While total sales volumes rose only by a very modest 0.1% m/m, at least they didn’t give back any of the 3.1% rise in February. As always, we pay particular attention to the so-called ‘core’ retail sales measure as the volatile motors category is stripped out. On this basis sales volumes also rose by a marginal 0.1%, somewhat at odds with the signs from the March consumer confidence figures which showed a decent rebound. In terms of the detail by retail sector, March was something of a mixed bag. Five of the thirteen retail categories recorded a monthly decrease in sales volumes, with fuel (-2.2%) and electrical goods (-2.0%) showing the largest declines. However, the majority of categories recorded monthly gains, most notably in the hardware, paints and glass (+4.9%) and clothing and footwear sub-sectors (+2%).
Core sales recorded a quarterly rise in Q1, but momentum going into Q2 is lacklustre
Given the volatility in the monthly figures, it never really pays to look at one month in isolation. The release of the March retail figures allows for analysis of spending patterns over the first quarter of the year. Total sales volumes fell by 2.3% in Q1 relative to Q4 of last year, the largest quarterly drop since the first quarter of 2010. While the figures indicate renewed weakness in early-2011 and certainly don’t bode well for the official Q1 total consumer spending figures (from the Quarterly National Accounts), the decline here was largely attributable to the motors-related fall in January and we would not be surprised to see some recovery in the Q2 figures.
Core retail sales provide a clearer picture of the underlying trend in spending in Q1. The trajectory here has shown a bit of improvement, with core sales volumes rising by 0.4% from Q4 following 3 consecutive quarters of decline. However, the level of core sales in March was unchanged from the Q1 average, so it has to be said that the underlying momentum going into the second quarter is lacklustre.
Spending stabilisation at low levels still looks like it is underway, but any notable uplift continues to look some way off
Overall, incoming signs from the retail sales and consumer confidence figures have been somewhat mixed. While retail sales managed only negligible gains inMarch, sentiment rose to a 7-month high (albeit it still remains at low levels historically). The more important general point here is that consumer spending continues to look as though it is stabilising, but at weak levels. Going forward we see a continuation of very subdued spending. The poor labour market situation is one of the major factors here, in addition to other negatives including the impact of higher borrowing costs (on account of ECB rate increases) on the consumer’s ability and willingness to spend.
Lynsey Clemenger,
Economist, Republic of Ireland,
Ulster Bank Capital Markets
,
3rd Floor,
Ulster Bank Group Centre,
George's Quay,
Dublin 2.
Tel: +353 1 6431565
Fax: +353 1 6431672
Email: lynsey.clemenger@ulsterbankcm.com
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