Consumers flocking back to shops as prices slashed
CONSUMERS have finally loosened their purse strings and started spending again as major price cuts have finally given them more value for money.
Retail sales soared by 14.9pc in February alone, driven mainly by a huge boost to car sales under the government scrappage scheme.
But shoppers are also availing of much better value now on offer -- with previous surveys showing they are spending €10 a week less on groceries even though they're eating just as much, while average hotel rooms are down from €101 to €80, and cars are up to €12,000 cheaper than a year ago.
Total retail sales are up 3pc year on year, the first time in over two years that they have increased, although most retailers are still cutting prices to survive, new figures from the Central Statistics Office show.
An increase in retail sales in likely to boost the amount of value added tax (VAT) that the Government earns this year -- despite a small decrease in the VAT rate introduced in January. VAT was a big earner for the State during the boom but has been shrinking steadily as the recession bites.
VAT is the most important source of revenue for the State after income tax, and generates around a €1bn a month for the Government.
Any boost will be welcome for the Government, which was forced to admit earlier this month that it has so far failed to collect as much VAT as it hoped this year, as VAT receipts fell 1.3pc below target.
An upbeat Finance Minister Brian Lenihan hailed the figures as evidence that government policy was working.
Coming just 24 hours after the ESRI predicted a return to growth next year, the figures were a sign the economy was "turning the corner" and was now on an upward trajectory, he said.
"There are other signs and straws in the wind as well. Consumer confidence is returning, there have been big sales of motorcars this year, a big increase in the numbers of sales and that has added to the general improvement in consumer confidence," Mr Lenihan said.
"Again we have a bit to go there, but we're on the road as far as consumer confidence is concerned. This is the first year- on-year increase in retail sales since January 2008 and that's quite remarkable, so again we're seeing signs of stabilisation," he told RTE radio.
The motor industry was the big winner with a massive 34.5pc jump in sales in February, and up 30.5pc on the same time last year.
Although people are back buying, they are spending less than they were a year ago, as the value of retail sales has fallen by 1.3pc since February 2010, the CSO figures show.
This is particularly clear in the case of department stores, where there has been a 10.9pc increase in the amount of goods sold -- but only after they slashed prices dramatically -- while the amount taken at the tills has dropped by 1.2pc.
And while sales of furniture and electrical goods are also up, again retailers have seen a drop in takings as prices continued to fall.
A notable exception to this is fuel, as it appears that people are driving less with the fall in employment, but higher petrol prices mean they are still spending more on filling up.
IBEC's Retail Ireland director Torlach Denihan welcomed the fact that core retail sales -- excluding cars, bars and fuel -- had increased 2.5pc in February.