Retail sales at nine-year high as we loosen purse strings
RETAIL sales are growing faster than at any time in nine years, thanks to a boom in car and home-related purchases.
The sudden surge in sales of big-ticket items comes after years of decline or very modest growth in the retail sector.
It suggests that consumers are beginning to loosen their purse strings – although they remain careful of spending on day-to-day items such as groceries.
The volume of sales rose by 8.9pc in the year to January 2014, which was the highest annual increase since May 2005, new Central Statistics Office figures show.
"Consumer confidence surged as Ireland approached the EU/IMF bailout exit," said Conall Mac Coille of Davy Stockbrokers. There has been a massive turnaround in certain sectors, particularly car sales.
New car purchases are driving growth with a huge increase in sales compared to a year ago, whereas if you strip these out, retail sales grew by a more modest 2.7pc.
However, home-related purchases also saw strong growth with an 11.2pc increase in furniture and lighting purchases, 9.1pc growth for electrical goods, and a 5.1pc increase for the hardware sector.
This indicates consumers are much more confident about making big-ticket purchases than they were a year ago, analysts said. Department stores have also seen 8.6pc growth in the last year while fuel sales were up 4.3pc.
However, food, clothes, shoes, newspapers, books and pharmaceuticals all saw a decline over the past year – indicating consumers continue to watch their everyday spending and cut down on waste.
The CSO figures show that total sales increased by 2.3pc in January alone compared to the previous month, while the total value of sales rose by 6.9pc in the year to January.
Alan Nolan of the Society of the Irish Motor Industry said that the surge of nearly 50pc in new cars licensed in January showed many consumers were much more confident about their financial security than they had been a year ago, and also had more finance options available.
"If you buy a new car chances are you're committing to making repayments for the next three or four years, so people would tend to hold off unless they're feeling more secure," he said.
This improved buying climate had also been greatly helped by having the Budget early in October, meaning people had been able to plan for a new car purchase without worrying in December about further income hits, he said.
Car sales had continued to be strong in February indicating this was not a one-month wonder and the number of 141 plates in people's driveways was noticeably higher than 131 cars a year ago, he added.
However, though the retail sales figures were "exceptionally strong", they were not as spectacular as the headline 8.9pc figure suggested, said Mr Mac Coille of Davy Stockbrokers.
In fact, if the huge increase in January car sales was excluded, retail sales had fallen by 1pc in the month, although they were still up 2.7pc in the year.
Alan McQuaid of Merrion stockbrokers said consumer sentiment had hit its highest level in seven years and this was now being reflected in stronger personal spending.
"A key issue going forward will be the state of the labour market and the signs are encouraging on this front as we've seen with the most recent official employment data," he said.
Job figures out this week showed that an extra 60,000 people have got back to work in the past year, and there are now over 1.9 million people in employment for the first time since 2009. That means more consumers should have money to spend in the shops while the unemployment rate has also fallen sharply to 12.1pc, meaning less pressure on the social welfare budget.
The Irish Small and Medium Enterprises Association noted the improvement in retail sales but called on the Government to press ahead with its long-awaited retail consultation forum announced in its Action Plan for Jobs 2014.
The sector had endured a torrid time in the past six years and still faced excessive business costs, with measures needed to tackle high rates, rents and bank credit availability.