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Irish retail sales data for April point towards a sharp step-up in consumer spending of late.
Along with strong jobs data and buoyant exports this suggests that our expectations for 2015 both in terms of a 2% increase in consumer spending and a 4% rise in Irish GDP may need to be revised upwards (perhaps by about 0.5% in both instances).
The headline retail sales number shows a modest monthly rise of 0.5% in April but we think this is depressed by technical problems adjusting for the new seasonal purchase pattern that follow from the introduction of ‘1’ and ‘2’ registrations in recent years. While the CSO reports motor trades sales fell by 2.5% in April, it is very clear that the underlying trend in this area is strongly positive (as the annual increase of 26.2% underlines).
Excluding car sales, Irish retail spending jumped by 3.1% in April-the largest monthly rise since January 2001. The April spending figure may be flattered by problems in adjusting for the timing of Easter as the period covered by the data only starts on Easter Sunday. An ‘Easter shopping‘ effect may be hinted at in the 11.6% monthly rise in spending in Department stores- the largest monthly rise in this category since February 2002. Similarly, sales of food, beverages and tobacco jumped by an unusually large 4.8% between March and April. That said, there was a monthly fall in spending in 5 of the 13 retailing sectors included in the CSO release. So, while these data suggest a clear pick-up in household spending, consumers are prioritising different areas on a monthly basis. Encouraging as they are, these retail data do not signal the onset of a generalised boom.
While many Irish households are still cash constrained, intense competition among retailers is stretching consumers’ spending power. The increase in the volume of retail spending is being notably boosted by a continuing fall in retail prices. In April 2015 Irish retail prices were 3.2% lower than a year earlier and excluding cars some 3.5% lower.
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.