Rise in sales not expected to last as Budget looms
A SLIGHT rise in retail sales during August is not predicted to last as people continue to hoard money in advance of another savage Budget.
Retail sales rose by 1.3pc in August compared to the same time a year ago, and were up 1.1pc on July, the Central Statistics Office revealed.
Car sales -- bolstered by the scrappage scheme -- continued to drive retail growth, rising over 20pc in the last year, but once these were stripped out the volume of retail sales is 1.4pc lower than it was a year ago.
Furniture and bar sales were worst hit, with both falling by over 10pc in the last year, while clothing and footwear sales rose slightly. And though the volume of sales rose, the value fell by 1.7pc, meaning prices fell and people spent less money.
Ibec's Retail Ireland group said that the figures confirmed the sector remained in the doldrums, with signs of a recovery earlier in the year running out of steam.
"Consumers are nervous about the implications for them of the costs associated with the banking crisis," Retail Ireland director Torlach Denihan said.
"Many people are sitting on significant precautionary savings and will not spend any of it until they have clarity about the future," he said.
Retail Excellence Ireland (REI) said that motor sales had been artificially propping up spending figures and the decline in spending without them was bitterly disappointing. "What the August figures reveal is that the fear factor is still high amongst the population when it comes to spending -- and this could be a sign of worse to come," said REI Chief Executive David Fitzsimons.
"The Irish people know there is another harsh Budget looming and this will be reflected in their cautious approach to spending over the next couple of months," he said, warning the Government would have to find a way to stimulate consumer spending to prevent an economic standstill.
Consumer spending is likely to remain restrained over coming months as tight credit and higher interest rates lead households to concentrate on reducing debt, said Bloxham stockbrokers analyst Alan McQuaid.
"Implementing further tough fiscal austerity measures in the December Budget will, in our opinion, only do more harm than good to the economy in 2011, particularly if personal taxes are raised again, and if there isn't another stimulus package for consumers to replace the car scrappage scheme," he said.
Davy economist Aidan Corcoran said that the recovery in retail sales in August would be important in helping the Exchequer reach its tax-take targets which will be revealed on Monday.
"The recovery may proceed at a slow pace but the trend is clearly positive," he said.