September was another poor month for Irish retailing as total sales volumes fell by 0.8% m/m last month.  The weakness was led by the car sector, as sales at motor trades outlets dived by 3.4% m/m.  Today’s report is very much consistent with an ongoing payback effect for prior buoyancy in car sales linked to the scrappage scheme which expired in June: motor trades sales volumes have fallen by 15% since then according to the CSO, exerting downward pressure on the aggregate measure over the period.

But weakness continues to extend beyond motor trades: non-car volumes have fallen to levels last seen in May 2005

But the September figures show that the weakness in spending continues to extend beyond trends in car sales.  Core retail sales volumes (i.e. stripping out motor sales) fell for the third consecutive month in September, with a 0.2% monthly fall taking underlying sales to their lowest level since May 2005.  Eight of the twelve non-motor sectors reported lower sales volumes in September, with the Electrical Goods category the only area to show meaningful signs of growth.  Sales here were up 2.7% last month, resulting in an annual increase of 3.2%.  An indication of the breadth of the weakness in retailing is provided by the observation that Electrical Goods is the only sector to have recorded any volume growth over the past year.  Indeed, seven sectors of non-car retail (including Books, Furniture and Lighting, and Pharmaceuticals and Cosmetics, Clothing and Footwear and Fuel) are showing annual declines of in excess of 5% in the year to September.

Consumer spending is likely to have acted as a drag to economic growth in the third quarter

The latest National Accounts showed that consumer demand (which includes both goods and services spending, whereas retail sales covers over goods spending) managed to register an increase in the second quarter. However, we learn from today’s release that both total and core sales posted declines in the third quarter (-1.4% and -0.8% respectively), although while Core retailing is continuing to decline, there has been a deceleration in the pace of weakness compared to the worst part of the cycle. Overall, it looks highly likely that consumer spending will have acted as a drag on overall economic growth in the third quarter.

Simon Barry,
Chief Economist Republic of Ireland,
Ulster Bank,
Ulster Bank Group Centre,
George's Quay,
Dublin 2.

Tel:   01 643 1553
Fax:  01 6431672
Mobile: 086 3410142

simon.barry@ulsterbankcm.com
www.ulsterbank.com/economics

John Fahey,
Economist, Republic of Ireland,
Ulster Bank Capital Markets,
3rd Floor,
Ulster Bank Group Centre,
George's Quay,
Dublin 2.
 
Tel:   01 6431565
Fax:  01 6431672

Email:  john.fahey@ulsterbankcm.com
Website:    www.ulsterbankcapitalmakrets.com