Sunday 24 September 2017

Sales up but shops feel pressure from online

Main street stores are feeling the pressure from online. AFP Photo
Main street stores are feeling the pressure from online. AFP Photo

Sean Duffy

A sharp rise in retail sales compared to last year may mask Brexit effects hitting the economy, analysts have warned.

New figures from the Central Statistics Office (CSO) paint a mixed picture for the retail sector. Excluding car sales, figures show retail sales were up by 6pc in March compared to 2016, but declined by 0.7pc from February's reading.

Figures from the US - often a bellwether for global trends - showed that consumer sentiment hit a three-year low in the first quarter of the year.

Sentiment in the UK also softened in the first three months - due to inflation brought about by a weakened sterling.

The primary concern for Irish policymakers is uncertainty stemming from Brexit, although analysts are split over the short-term implications for retailers.

Alan McQuaid, chief economist at Merrion Capital, said he expected Brexit uncertainty to have an adverse effect.

"The Brexit fallout and the uncertain economic implications will likely continue to impact on Irish consumer sentiment, most likely resulting in lower personal spending in the months ahead," he said.

"Anecdotal evidence suggests that the sharp fall in sterling post the "Brexit" referendum has enticed Irish shoppers to spend in Northern Ireland."

However, analysts at Davy Stockbrokers said depreciation in the value of sterling was having a positive effect on the purchasing power of consumers.

"The damage that was done to the retail sector is slowly being repaired. We've seen consumer spending levels return to the pre-crisis peak but the growth is quite stable and healthy.

"People are spending but are also paying down their household debt. The situation in the UK is that the fall in the value of sterling is pushing prices up. We are seeing the opposite effect here, which is boosting households' purchasing power," said Cathal Mac Coille, chief economist at Davy.

He also highlighted a trend in the UK which shows that consumer spending is being propped up by a strong surge in credit card debt- a factor not at play in the Irish figures.

Representative body Retail Ireland said it was difficult to assess the substantive impact of the March results.

Director Thomas Burke said there have been some worrying trends developing recently. "Over the past six to eight months, we are definitely seeing the impact of online starting to bite in some sectors," he said.

"We are seeing department stores and clothing and footwear definitely coming under pressure from online retailers outside Ireland. That is a concern and is something we will need to keep an eye on."

Mr Burke said the timing of Easter and Mother's Day this year had made assessing last month's figures more complicated. Politicians will be monitoring the retail sector in the months ahead for any signs that Brexit is affecting sentiment .

Earlier this week, the CSO published data which showed visitor numbers from the UK fell by 6.5pc in the first quarter of the year. The decline in the value of sterling is the most likely cause of the falloff.

Irish Independent

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