Shoppers took to town in June

Consumers shrugged off their economic worries and hit the shops in June, according to the latest retail sales release from the Central Statistics Office (CSO).

The June numbers show the value of retail sales over the month was 4.2 per cent higher than in May and 4.8 per cent ahead of June 2002.

Volume figures, which strip out the effect of pricing, were also strong, showing a monthly rise of 4.7 per cent in June and an annual jump of 2.9 per cent.

Quarterly numbers were less positive however, with sharp weakness in May sales leading to virtually flat volume growth in the three months ending June 30th.

The sluggish performance followed shrinkage of 1.5 per cent in the three months ending in May.

"Overall, the numbers are reflecting consumer sentiment, which surveys have shown to be weak, rising unemployment and inflation, which was very high until recently. All of these things are going to weigh on consumers," said AIB chief economist Mr John Beggs.

Mr Beggs is expecting retail sales, which account for about two-thirds of all consumer spending, to remain relatively anaemic as long as the jobs market appears to be tightening.

He highlighted the Government's expectation of a €500 million taxation shortfall this year, much of which is attributable to poor income tax receipts, as evidence of continuing pressure on both employment and earnings.

A breakdown of the sales figures for the period between March and May shows the most substantial volume growth came in sectors where prices have been dropping over the past year, such as clothing and footwear.

Volume slippage was meanwhile evident in food, beverages and tobacco, where prices have risen.

Mr Jim Power, chief economist with Friends First, highlighted the divergence between the monthly volume and value measures as evidence that retailers are being forced to reduce prices to move their stock.

Inflation data has shown a similar trend over the past few months, with particularly aggressive price cutting evident on more expensive goods during summer sales.

Mr Power said this is "a sure sign that retailers are meeting more consumer resistance".

Nonetheless, Mr Power sees consumers as "one of the strongest and main driving forces in the Irish economy".

He expects this month's good weather to offer a boost to August sales, while the lower mortgage interest repayments that flowed from June's cut in interest rates are likely to underpin retailing in July.