Retail sector set for slow growth this year
Retail recovery 'still in its infancy' with sector 'operating at levels far below that of the boom years', says Retail Ireland
Print10 February 2015
Consumer spending is predicted to rise 2.7% this year, following growth of 1.3% last year. Strong January VAT returns, which were €225 million or 12.9% ahead of last year suggest the recovery is starting to gain traction. An increase in employment and the fall in oil prices is expected to boost consumer spending power.
Following the publication of Retail Ireland’s Q1 Retail Monitor, director of the IBEC group Tom Burke said: “The sector has had some very tough years, but indicators would suggest that fortunes are starting to look up. Key indicators are pointing in the right direction. More people are at work, disposable income is rising and falling oil prices will increase consumer spending power. This is good news for the wider economy. It means more jobs and more tax revenue.”
However Burke warned that the retail recovery is still in its infancy and the sector is still operating at levels far below that of the boom years. Turnover is down nearly 20%; employment in the sector has fallen by 44,000; and 3,500 retail units closed during the recession. Many businesses are still constrained by boom time costs and charges. Progress could easily be undone if costs, including wages, increase beyond what is affordable.
According to Burke: “Talk from certain unions of large, wide-spread pay awards is utterly unrealistic and at odds with the reality facing retailers around the country. Creating unrealistic expectations will only result in harmful discord in workplaces and could force companies to rethink recruitment plans. Retail was one of the last sectors to feel the recovery and we still have a very long way to go.”
Consumers look set to benefit from yet another year of low inflation, with intense competition keeping prices down. IBEC estimates overall inflation in the economy to be 0.4% this year. At present, goods inflation is at minus 2% annually as shops battle for footfall.
Supermarkets and convenience stores in the greater Dublin area continue to record the strongest recovery, with regional locations lagging behind.
The Retail Monitor tracks key issues across the economy and the sector, to give an insight into future performance and current challenges.
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