Retail sales eased off slightly in February after a blistering start to the year, but the prospect of SSIA windfalls are still driving customers to the shops, retail figures show today.
Excluding car sales, the retail sales index for February clocked up a 6 per cent increase in sales volume over the same month in 2005. In January retail sales rose by 7.9 per cent.
Economists suggest that the strong retail sales seen over Christmas and the opening months are due at least in part to the SSIA funds being spent in advance of the payout due to begin in May.
According to economic theory households prefer to smooth their consumption than spend in peaks and troughs.
However with inflation also rising there is growing concern that higher prices could choke off the consumer boom.
Rossa White, economist at Davy stockbrokers, pointed out that retail sales account for half of consumer spending, the rest being in services.
"At this stage, we are on track for our above consensus 7.5 per cent forecast. But we will watch inflation closely. Higher full-year inflation than our current forecast of 3.5 per cent would crimp real income and, consequently, spending," he said.