Friday, March 20, 2009

Inconspicuous Consumption

The latest Retail Sales Index report from the CSO is - to put it mildly - horrendous. This is economic bungee jumping without the bungee. Total volumes are down -20.4% year-on-year in January 2009. Sure, the motor trade have contributed much of the decline, but every single other category is showing year-on-year declines: up to -34.2% in the case of furniture.

As the table shows (which I created using annual CSO data re-based to the current 2000 base - click on it for a larger version), some categories are showing volumes down at levels last seen in the late 1990s. Some - such as bars - are actually down to levels from before 1995 (earlier data isn't available on the otherwise excellent Database Direct facility). Like I said: horrendous.

It seems as if Irish consumers are conspicuously not spending right now. Indeed, feedback from various focus groups I have been involved in recently would suggest that there is a mindset out there among many people that they should not be seen to be spending. Especially on cars, furniture and other big ticket items. Or else they're taking their fragile earnings and spending them across the border.

Which brings us back the government's challenge of catching the falling knife. With consumer spending this fragile, what will income tax rises and a slew of stealth taxes do to spending? Constantin Gurdgiev is wondering as well.

Guess I'm going to have to get that retail data from the CSO for the early 1990s in order to track how far some volumes will fall in the months ahead.

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