Uneven Irish Retail Recovery Continuing Despite Disappointing May Data


May retail sales slide after large April increase

Underlying trend still positive…

…but hint at cash constrained Irish consumer.

We see solid increase in Household spending in 2015 but nothing approaching a boom.

Retail sales for May show a disappointing but not entirely surprising drop in May after a sharp rise in the April figure (excluding car sales). Our judgement is that the trend in Irish consumer spending is strengthening but the process remains uneven because many households are cash constrained. As a result, these data show a ‘two steps forward one step back’ pattern and suggest current conditions remain some distance from anything that might be described as a consumer boom.

Excluding cars, the May retail sales reading is down 2.0% on April and just 0.9% above the January figure suggesting a very muted improvement. This follows a 3.0% monthly jump in April. Given substantial month to month volatility, we think the three month moving average measure which shows a quarterly gain of 1.0% and an annualised increase of 4.3% is probably a better barometer of the current improving trend in retail spending.

We tend to downplay monthly changes in the headline data (inclusive of car sales) at present because of marked changes in car buying patterns since the introduction of ‘1’ and ‘2’ registration plates which can’t yet be properly captured in seasonal adjustment procedures. That said, it is clear that new car sales is among the strongest areas of consumer spending at present.

With employment growing strongly and consumer sentiment on an improving trend, we think overall household spending (including spending on consumer services as well as on retail goods) will increase by about 2.5% in 2015 but today’s data are consistent with a very uneven recovery reflecting limited income growth for most households and continuing pressures on spending power. While a 2.5% gain would represent a notable achievement and the strongest outturn since 2007, it would still fall markedly short of the boom trend which saw average annual increases in household spending of 6.4% between 1998 and 2007.

This non-exhaustive information is based on short-term forecasts for expected developments in the economy and financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalised investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a judgment as of the date of the report and are subject to change without notice.