The volume of retail sales declined by 4.8 per cent in the year to May, the fastest rate of decline in over 21 years figures released by the Central Statistics Office today showed.
A 13.9 per cent annual drop in electrical goods sales dragged down retail activity in May, contributing to a fourth consecutive month of decline, according to the CSO. Sale of furniture and lighting fell 11.1 per cent during the 12 months to May.
Another factor was the 10 per cent annual fall in car sales, reflecting both a decline in consumer confidence and the delaying of car purchasing ahead of the changes in the motor tax system at the end of June.
Between April and May the volume of car sales fell 6.5 per cent.
Excluding motor trades, there was an annual decrease of 2.4 per cent and the monthly change was 2.6 per cent. The May fall is the sharpest annual decline since January 1987 and follows a 3.4 per cent drop in the year to April.
Elsewhere today, the governor of the Central Bank, John Hurley, told the Oireachtas Committee on Finance and the Public Service that the recent dramatic falls in Irish bank share prices may be "overdone".
Mr Hurley said he didn't normally comment on share prices but added: "Maybe the drop in prices has been overdone, but I should not intrude where the markets know better."
The ISEF index of Irish financial stocks has fallen 68 per cent over the past year.
Broader consumer confidence has been hit by the sharp slowdown in the construction sector and falling house prices, coupled with rising unemployment.
In his latest quarterly economic outlook, Friends First economist Jim Power said “consumer confidence is being destroyed by rising interest rates, rising oil and food prices and a housing market that is weakening."
“The consumer has ceased to be a driver of the Irish economy and is moving into a serious retrenchment that is set to last for the foreseeable future.''
Davy economist Rossa White said “new car sales are being hurt by slowing income growth, negative wealth effects, soaring fuel prices and, most importantly, the government's tax changes.”
He said rising inflation, tight credit and the weakening labour market were squeezing all other retail categories.
Ibec director of policy Danny McCoy said the spending slowdown reflected weakening economic sentiment.
"Some sectors have been particularly badly affected. In an uncertain economic climate, consumers are unwilling to invest in big ticket items such as cars. As a result, motor sales and activity related to new housing purchases have seen particularly sharp falls."
Over the three-month period February to April all sectors declined; with the exception of DIY-related products such as hardware, paint and glass, which showed flat sales compared with the three months ending in January 2008.
Sales of electrical goods declined by 8.6 per cent over the period.
