Retail purchases rose by 4.4% in value terms in June, CSO data show

Irish consumers continue to spend more in the high street compared to last year, but falling car sales have caused this growth to slow significantly, according to the latest data from the Central Statistics Office (CSO).

Latest CSO figures show that the value of retail purchases rose annually by 4.4 per cent in value terms and 3.4 per cent in terms of volume in June, lower than in preceding months.

On a month-on-month basis, sales were 0.5 per cent higher in June than in May, with volumes rising at the same rates, as retailers put off price increases during the summer sales period.

And, according to one analyst, falling consumer confidence may have hurt spending in July.

When the impact of declining car sales is excluded, retail sales in June rose by 2.4 and 2.1 per cent in value and volume terms, respectively, when compared to May. On an annual basis and excluding car sales, retail sales activity gathered pace by around 6 per cent in both value and volume terms.

Irish Intercontinental Bank (IIB) chief economist Austin Hughes said the strength of non-car sales was explained by a combination of improved consumer confidence and bargain hunting during the early summer months.

But he also cautioned that consumer sentiment had declined in July. "Retail sales rose in June largely as a result of bargain hunting for clothing and footwear as well as household equipment in the summer sales. These increases tally with an improvement in the buying climate in the IIB/ESRI consumer sentiment index in May and June. Ominously, this indicator deteriorated sharply in July", said Mr Hughes. He added that consumer spending could fall back as a result of this deterioration.

When compared with the previous month, and when seasonally adjusted, consumers spent 5.5 per cent more money on clothing and footwear in June.

Due to lower summer sales prices, this equated with a higher percentage increase, of 6.4 per cent, in the actual number of items purchased.

Household equipment purchases also rose strongly in the month, up 3.9 per cent in value terms and 3.5 per cent in volume terms. But demand for motor cars and related products fell in June by around 5 per cent compared to May in both value and volume terms, while the volume of cars purchased in June was slightly lower than in June 2004.

Energy costs have not yet affected the demand for goods other than cars, according to economist Dermot O'Leary of Goodbody stockbrokers.

"Excluding the volatile and influential motor industry, core retail sales growth, in fact, accelerated . . . Therefore, there is no evidence to suggest that retail sales momentum has not been materially altered by the impact of higher energy costs over the past few months."

However Mr Hughes said that such an impact could yet materialise. "With the rise in heating costs set to hit spending power more forcefully in the months ahead, we feel there could be some further moderation in consumer spending growth," he said.

The latest figures for euro-zone retail sales imply that Irish consumer spending continued to outperform the euro zone. Euro-zone retail sales volumes declined annually by 0.8 per cent in April, compared with 3.5 per cent growth in Ireland that month.