Business

Retail sales weaken in face of cost-of-living squeeze

Surge in inflation and consecutive ECB interest rate hikes had less than expected impact on consumer behaviour

The largest monthly declines in retail volumes were found in bars followed by other categories including pharmaceuticals, medical and hardware products. Photograph: PA

Eoin Burke-Kennedy
Wed Feb 28 2024 - 11:45

Retail sales have weakened slightly amid higher prices and squeezed household budgets.

Central Statistics Office (CSO) figures show the volume of sales rose by 0.5 per cent in January and were up by 2.7 per cent on the same time last year.

But when car sales are excluded, the volume of sales fell by 0.1 per cent and were up by just 0.4 per cent in the year.

The largest monthly declines in retail volumes were in bars (-10.6 per cent); pharmaceuticals, medical and cosmetic articles (-6.4 per cent); hardware, paints and glass (-5.1 per cent); and department stores (-3.9 per cent).

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The largest annual decreases were in department stores (-10.2 per cent); hardware, paints and glass (-8.2 per cent); and bars (-7.5 per cent).

The CSO figures show monthly volume increases were recorded in clothing, footwear and textiles, which were 37.6 per cent up on a monthly basis, reflecting the January sales.

Books, newspapers and stationery were also up (3.9 per cent), as were furniture and lighting sales (2.7 per cent).

The rapid surge in inflation combined with 10 interest rate hikes from the European Central Bank (ECB) had been expected to severely curb retail sales but the impact has been less than expected.

This is perhaps a reflection of several factors but primarily the State’s strong employment figures with a record 2.7 million people at work. Savings built up during the pandemic may have also played a role.

The CSO figures show the value of retail sales was up by 0.9 per cent in January and rose by 5.4 per cent in the 12 months to January. Some of the year-on-year increase in value may be driven by prices.

Department of Finance exchequer returns for January show VAT generated €3.8 billion in January, up 4 per cent or €148 million on the same month last year. Strong receipts from the sales tax in January typically point to robust consumer spending in November and December.

The current high rate of inflation is also likely to be driving receipts. Consumers must spend more to buy the same amount of goods during periods of elevated price growth, which inadvertently boosts government VAT receipts.

The proportion of retail sales transacted online (from Irish registered companies) was 5.5 per cent in January compared with 5.4 per cent in December 2023 and 5.4 per cent in January 2023, the CSO said.

Separate data this week from the Economic and Social Research Institute suggested the domestic economy – as measured by modified domestic demand – grew by 3.7 per cent last year.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

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