Monday, April 28, 2014

Retail sales fall sharply

The CSO have published the provisional figures for the March retail sales index.  Once the motor trades are stripped out (which have a weighting of 29 per cent in the All Business Index in March) we see the following for the value and volume series.

Retail Sales to Mar 14

The strong increasing trend (in volume in particular) seen toward the end of 2013 has been replaced with an equally strong downward trend.  However, the scale of the year-end increases mean that even with the recent falls the annual comparisons paint a slightly better picture.

Annual Change in RSI to Mar 14

In real (i.e. volume) terms retail sales in the first quarter of this year were around three per cent higher than in the same quarter last year.  If the recent monthly changes are repeated over the next quarter then the annual comparisons in volume may not be positive for much longer.

Monthly Change in RSI to Mar 14

The monthly changes are very volatile and March 2014 figures are only provisional but it can be seen that the monthly drops in March were the largest such declines going back to late 2012 (and that was following the spike in electrical goods caused by the digital switchover).

At the time of the budget last October the Department of Finance projection was that the Consumption Expenditure component of real GDP would grow by 1.8 per cent in 2014.  Last week’s SPU increased this to 2.0 per cent.  Thus far the retail sales figures would suggest that is achievable but there will be significant increases required just to keep pace with the increase seen towards the end of 2013.  The DoF forecast is plausible particularly when the strong start to 2014 for the Motor Trades are included.

RSI All Business to Mar 14

Increased car sales make the consumption and retail sales figures look better but the overall impact on the economy is much more limited as the increased activity is the result of increased imports.

In the six months to February 2013 imports of Road Vehicles were €895.4 million.  In the same period to February 2014 these imports were €1,137.3 million, a rise of 27 per cent.  Of course, there are some gains to increased car sales.  The operating surplus and maybe even employment in the car sales trade increases and the government sector is a beneficiary through increased VAT and VRT receipts.

Consumption Expenditure also includes services not measure by the Retail Sales Index such as housing and accommodation, utilities, public transport, restaurants and communications as well as education, health, personal, professional and financial services.  The CSO does have a Monthly Services Index but that is driven by business-to-business services more than end-user consumption of services.

Anyway the take-out feature of this month’s RSI release is the sharp drop since the start of the year once the motor trades are excluded.  This is not reflective a nascent recovery.

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