The consumer continued to power the economy as Christmas shopping, rising incomes and housing market activity drove retail sales levels to new heights in December.
The latest retail sales index, published by the Central Statistics Office (CSO), shows that the value of sales in December were 6.4 per cent higher than in December 2004. Main-street competition tamed price growth and most of this increase was accounted for by increased volumes, which rose annually by 5.9 per cent.
The price falls come at a time when retailers' operating costs are far higher in Ireland than in Britain and Spain. The costs of most serious concern are energy, waste disposal and rates, said Torlach Denihan, director of employers' federation Ibec's retail division, Retail Ireland.
"The continuing decrease in retail prices proves that Irish consumers get a fair deal from the retail sector and that competition is intense," he said.
Excluding car sales, sales volumes rose by 6.5 per cent annually. Retail sales levels are at record levels, while the rate of sales growth in 2005 was the fastest since 2001.
The growth reflects strong Christmas spending. Compared with the preceding November, the volume of activity rose by 0.8 per cent, but the value of activity fell by 0.2 per cent, reflecting price pressure towards the end of the year. A strong housing market added momentum to the figures. The furniture and lighting category put in the strongest performance, recording 16.6 per cent rise in volume terms, while sales of hardware, paints and glass products were up 13.7 per cent.
DIY sales also did well in 2005, with average growth of 11.3 per cent year-on-year. The outlook for DIY spending in 2006 is positive, with surveys consistently showing that this category will benefit from the upcoming release of the SSIA funds, said Goodbody economist Dermot O'Leary. Consumer spending was down, or moderate in some areas, most notably in the categories of electrical goods, food and non-alcoholic beverages and bars.
"One notable feature of the retail trade in 2005 was the performance of bar sales. These had contracted for 40 consecutive months on an annual basis before entering positive territory in July. But the headline rate has moderated since then," he said.
Yesterday's figures are seen by analysts as a strong start for the economy in 2006.
"Early indications suggest that consumer spending was at least as robust in January. New car sales reached a new record for that month," said economist Rossa White of Davy Stockbrokers.
Alan McQuaid of Bloxham Stockbrokers said that retail sales growth would remain strong in the coming year
"There are a number of reasons to be confident. The first is the continued growth in real disposable incomes in the economy, reflecting strong employment growth, significant increases in incomes in real terms and the tax reductions and transfer increases announced in the budget.
"The second is the fact that consumer confidence seems likely to remain fairly positive, barring any unexpected shocks . . . and the third is the maturing of the first portion of special saving incentive accounts."
The CSO attributes the year-on-year increase to strong consumer spending during the Christmas period.
