Irish retail sales remained at a 24-year low in December on a year-on-year basis and economists expect a deepening recession, fears over further job losses and global turmoil to take their toll this year. December retail sales rose 0.5 percent over the month but were 8.3 percent lower than a year earlier, unchanged from November, Central Statistics Office (CSO) figures showed on Friday.
The year-on-year decrease was the largest since February 1984, matching the drop seen in November. Excluding motor trades the drop was the biggest on record, the CSO said. "In annual terms, sales were down 8.3 percent in December, unchanged from the previous month but remained at a rate of decline last seen in the recessionary period of the 1980s," said Ulster Bank economist Lynsey Clemenger.
The bursting of Ireland's property bubble and the credit crisis has shattered business confidence and the former "Celtic Tiger" is expected to suffer a 4 percent contraction in economic output this year - its worst recession on record. The country was last in recession in 1983. For 2008 as a whole the volume of retail sales fell 4.5 percent on average, the largest decrease since 1982, the CSO said. That compared with a 6.4 percent rise in 2007.
"Consumer spending is set for a very, very weak period," said Deirdre Ryan, economist at Goodbody Stockbrokers. "If you look at the wider issues that are affecting consumer spending over the near term, really it's a very bleak outlook." Economists expect retail sales to drop 5.8 percent this year, according to the latest Reuters poll.
Labour market gloom deepened this week with Swiss aircraft maintenance group SR Technics saying it planned to close its Dublin airport operation with the likely loss of 1,135 jobs. Ryanair, Europe's largest budget airline, said it would cut 200 jobs. Despite annual consumer prices falling in January for the first time since 1960, the growing economic gloom is expected to dent appetite to spend.
"Although declining interest rates and lower inflation should boost disposable income this year, these positive factors are likely to be more than offset by the negative impact of declining employment, lower pay increases and a rise in direct taxes," said Bloxham chief economist Alan McQuaid.
The government unveiled a pension levy on public workers last week to help plug a multi-billion euro hole in its finances triggering a sharp fall in its approval ratings. "Given the high degree of uncertainty regarding economic prospects both domestically and internationally, consumers are likely to remain cautious," said Bloxham's McQuaid.