WHEN SET against the background of sharply rising unemployment and strongly negative economic growth, the dramatic collapse in retail sales in 2009 was hardly surprising. Last year was indeed a very difficult one for retailers.
The industry group, Retail Ireland, has described it as the worst experienced by the sector in living memory. And figures from the Central Statistics Office bear that out. These show that retail sales fell 14 per cent by volume in 2009 – and even more (18 per cent) by price.
For consumers too, economic conditions have been equally tough. Job losses for some, pay cuts for many and worries about job security have forced most households to save more and to spend less. Precautionary saving has taken its toll on retail sales with, as yet, no sign that the sales decline has run its course despite heavy price discounting by retailers of some consumer goods, notably in clothing, footwear and textiles.
Nevertheless, even in this bleak retail landscape, there are some modest signs of encouragement and hope. The recent weakening of the euro, which has made cross-Border shopping a less attractive financial option for visitors from the Republic, provides one. Another is consumer sentiment, as measured by the KBC Ireland/ESRI monthly index, which showed further improvement in January.
This can be seen as reflecting an easing of public fears and perhaps more optimism about national economic prospects. The consumer sentiment index, which reached its all-time low in July 2008, has recovered slowly since then. However, caution remains the general watchword of consumers, many of whom carry high levels of personal debt which they must reduce before they resume discretionary spending.
Meanwhile, the difficulties of the retail sector persist. Consumer spending this year is likely to decline further, albeit more slowly than in 2009. Retail Ireland, which is affiliated to the employers’ body Ibec, has pressed the Government for relief on “excessive business costs related to rent, rates, service charges and labour”. In particular, it is pressing for a 10 per cent rebate on commercial rates paid in 2009 and asking Government to intervene in the rental market.
However, given the difficult state of the public finances and with the Government facing similar demands for assistance from so many other business sectors, it has little room for manoeuvre and no scope for financial concession.