Irish shoppers are keeping their wallets in their pockets as annual retail sales have recorded their biggest volume fall in 24 years, according to figures released by the Central Statistics Office (CSO).
The data reflect weak consumer spending and the construction slowdown as cars sales, home furnishings, electrical goods and hardware all fell sharply during the 12 months to August 2008.
This resulted in a 6 per cent fall in the volume ofretail sales volume - the biggest decline since February 1984. According to the CSO the volume of retail sales dropped 2.7 per cent between July and August.
Dr Ronnie O'Toole, chief economist, National Irish Bank, said the decline in retail sales in Ireland was following a similar pattern to other countries where property markets have collapsed, such as Spain.
He said the downward price trend was expected to continue next year particularly for food products. The weak retail sales were contributing to lower VAT receipts for the Exchequer, which would make next week's budget more difficult to construct.
"One of the most important forecasts for the Government in framing the budget is estimating the amount of revenue it will pull in next year, which will be very difficult to estimate," Dr O'Toole said.
Sales of lighting and furniture have been hit hard by the housing market collapse and plunged14.2 per cent year-on-year, while sales of electrical goods have fallen 6.6 per cent.
Home furnishings were 20 per cent lower while hardware, paints and glass sales were 14.2 per cent down on the same month in 2007, indicating the severity of the fall-off in the residential property market.
The bounce in car sales that followed the introduction of the new VRT Vehicle Registration Tax regime on new cars in July petered out in August, with car sales falling 6.8 per cent in the month and to minus 7.3 per cent for the year.
If car registration data is used, as opposed to the motor tax figures used by the CSO, the fall-off car sales appears far more severe. According to the Society of the Irish Motor Industry, car sales in August were over 40 per cent lower than the same month in 2007, and are almost 17 per cent lower so far this year.
If motor trades are excluded, there was an annual decrease of 5.5 per cent, and the monthly change was –1.1 per cent. This is the largest annual decrease since April 1988.
Alan McQuaid, chief economist with Bloxham Stockbrokers said the retail sales figures were extremely disappointing and suggest the risks to GDP forecasts remain on the downside.
He suggests this reinforces the need for the Government to introduce fiscal stimulus measures in the budget.
"A number of factors have contributed to the weak trend in consumer spending this year. Disposable income growth has been eroded by high consumer price inflation and the emergence of weakness in the labour market, mainly emanating from declining construction employment, but also reflecting a more generalised weakness in labour demand.
"In addition, surveys indicate a sharp decline in consumer confidence regarding both current conditions and future economic prospects, the fall out from the weak housing market, financial market turbulence and a general increase in economic uncertainty," Mr McQuaid said.
The value of retail sales dropped by 3.4 per cent in August 2008 compared to the same month last year and was down 3 per cent month on month.
The only areas showing a growth in business in August were sales of clothes, footwear and sales large department stores; which reported a 14.7 per cent monthly increase in sales volumes.
