Consumer prices are continuing to fall while retail sales are rising, according to new figures published by the Central Statistics Office (CSO) today.
The Consumer Price Index (CPI) shows that for the 12 months ending June 30th, 2010, consumer prices declined by 0.9 per cent.
The most notable price changes over the year were for clothing and footwear, which were down 11.2 per cent, food and non-alcoholic beverages - down 5.4 per cent and - furnishings, household equipment and maintenance, which fell 4.6 per cent.
During the same period, there were increases in prices for education, utilities and transport. The annual rate of inflation for services rose 0.9 per cent while, goods decreased by 3.1 per cent.
On a monthly basis, consumer prices fell 0.1 per cent last month, compared to a 0.3 per cent decline in June 2009. The most significant price changes in June were in clothing and footwear, which was down by an average of 1.1 per cent. The decline was attributed to sales.
There was also a 0.5 per cent drop in the cost of transport due to lower petrol and diesel prices, while alcoholic beverages and tobacco sales dropped 0.3 per cent.
Prices for miscellaneous goods and services rose 0.4 per cent due to an increase in the cost of home insurance.
The CPI excluding tobacco index for June decreased by 0.1 per cent in the month and was down by 1.0 per cent in the year. The index excluding energy products fell by 0.1 per cent last month and dropped 1.9 per cent for the year.
Ulster Bank economist Lynsey Clemenger said while the latest data showed an unexpected monthly decline in consumer prices, the drop was modest and needs to be taken in context of the four consecutive monthly increases that had gone before.
Meanwhile, retail sales rose by 3.5 per cent in May of this year, compared to the same month in 2009. The monthly increase was just 0.1 per cent.
However, if motor trades are excluded, the volume of retail sales only increased by 0.1 per cent in May compared to May 2009, with the monthly change remaining the same.
The motor sector showed a year on year volume increase of 21.9 per cent, furniture and lighting was up 19.5 per cent and clothing, footwear and textiles increased by 13.2 per cent.
According to the CSO, the value of retail sales decreased by 0.1 per cent in May 2010 when compared with May 2009 and there was a month-on-month change of plus 0.1 per cent. If motor trades are excluded, there was an annual decrease of 3.4 per cent in the value of retail sales and the month-on-month change was down 0.4 per cent.
Bloxham's chief economist Alan McQuaid said the latest retail sales figures were a further indication that things are improving on the economic front. "Quite clearly, the big winner this year as regards consumer spending will be the motor industry. Already new car sales in 2010 to date are higher than for the whole of 2009. However, other retail sectors are also likely to see positive gains," he said.
"Assuming the euro zone ‘debt’ crisis issue doesn’t drag on for a prolonged period and seriously dent consumer sentiment in the process, then there is every chance in our view that overall personal spending and in turn GDP, will be higher in real terms this year than in 2009."
Ibec warned that despite the modest improvements trading remained very difficult. Senior economist Fergal O’Brien said traders were still suffering from high costs and relatively slow sales.
“It is clear that although the Irish consumer is not as fearful as during 2009, the pace of consumption recovery will remain fairly modest until some headway is made in addressing the jobs crisis,” he said.
Small Firms Association director Avine McNally warned some goods such as clothing, food and drink were falling in price but services like water and energy were becoming dearer.
“Small Irish businesses have taken harsh steps to regain cost-competitiveness, yet many costs remain outside their control as they are government influenced,” she said. “When these costs are passed on to the rest of the economy, competitiveness and jobs are lost.”
The Irish Small and Medium Enterprises Association (Isme) said the cost of State-run services was also damaging businesses.
“Irish businesses have cut their controllable costs to the bone but are still hampered by increased state costs, particularly in the areas of energy, waste, local charges and transport,” Isme chief executive Mark Fielding said. “High state costs are the ‘Achilles heel’ of the business sector, who have been striving to remain competitive by driving down their own costs, while at the same time, the state increases its costs to business.”