Irish retail sales excluding car purchases boosted by an extended scrappage scheme fell 3.5 percent year-on-year in March, indicating the country is in line for another year of subdued domestic demand. With consumer spending expected to remain weak for the time being due to an unprecedented austerity drive and high unemployment, Ireland is relying on its trade-dependent economy to end three years of economic contraction.
Irish exports rose to a three-year high in February, according to data released last week, giving the eurozone struggler a shot at hitting the gross domestic product growth of 0.5 percent this year expected by economists polled by Reuters. But with Thursday's provisional data also showing headline retail sales down 1.7 percent by volume, there is little sign of upside surprise from a bruised domestic economy.
"The numbers are weak across the board. Total sales were up for the first quarter of the year in volume terms, but that was all due to car sales. The true gauge is the core sales measure, which is down by about 3 percent in the first quarter," Dermot O'Leary, chief economist at Goodbody Stockbrokers, said. "We continue to see a divergence between domestic demand and the export sector. A downgrade for expectations on domestic demand will be the key driver to downgrades to the government's economic growth projections."
Ireland's government is due to revise its economic growth figures that forecast a GDP rise of 1.7 percent this year on Friday and needs the contraction in the domestic economy to stop next year if it is to shoulder a hefty debt burden. Month-on-month retail sales, including and excluding the motor trade, both rose by 0.1 percent which economists said could be taken as a marginal positive. "Given weak consumer confidence and the hit on real incomes from rising oil prices, the volume of retail sales might have been expected to fall further in March," Davy Stockbrokers chief economist Conall Mac Coille wrote in a note. "The small rise in retail sales on the month is therefore a marginally positive outcome... (However) a sustained recovery in consumer spending remains elusive."