There's light at end of the tunnel There are difficulties for retailers but towards the end of this year we might see that unemployment has peaked Austin Hughes (right)
Published 24/03/2011 | 05:00
It was probably cold comfort to many Irish shop owners when they recently pored over data from the Central Statistics Office that indicated that the volume of retail sales grew 2.7pc in January, reversing a decline in December as ice and snow gripped the country.
The retail sector -- one of the biggest trades in the country with around 250,000 people employed in it -- has also been one of the hardest hit, aside from construction, since the downturn really took hold in 2008. It's also the main engine of the economy.
According to Austin Hughes, chief economist with KBC Bank Ireland, in 2010 retail activity accounted for €82bn, or 65pc, of Ireland's then €126bn in gross national product (GNP). That's even more significant than at the peak in 2007 when construction's importance to the economy was at its zenith. Then, retail accounted for €93bn, or 57pc, of almost €163bn in GNP.
But it's the value, rather than volume, of sales that is more critical to retailers. On that front, January also brought better news as the value of sales that month was 2.6pc higher.
"There are real difficulties for retailers in Ireland, but towards the end of this year we might see that unemployment has peaked," explains Mr Hughes, adding that may provide some stability as people become less fearful for their jobs. "I do think people are a little less terrified now about the state of the macro economy, but they don't tend to feel they have to go out and buy another TV or coffee machine. There's an aversion now to conspicuous consumption."
He likens the current environment to one of "guerrilla warfare" for retailers as they try to drum up consumer demand. Innovation is key, he notes.
Even before the election, David Fitzsimons, the chief executive of industry body Retail Excellence Ireland (REI), had inked a promissory note with Fine Gael that if the party reformed the joint labour committees and abolished upward-only rent reviews once in power, REI members would commit to creating thousands of extra jobs -- as many as 10,000 in the short term. "It's a good time to expand," he says, pointing out that new leases are now much more competitive.
One prominent retail specialist also said recently his firm was on the lookout to invest in Irish retail brands with the capacity for growth both here and abroad.
There are difficulties for retailers but towards the end of this year we might see that unemployment has peaked
Austin Hughes (right)