However, are we celebrating these figures too soon? Up until last month retail sales were in decline, with fewer and fewer people spending. So why the reversal in fortune? Why are we suddenly spending more? Well, while retail sales have increased so far this year these figures include motor sales. And as we are aware, June was the last month of the car scrappage scheme introduced by the government. After the 30th of June no government scrappage is allocated for new cars, meaning that if you were going to buy a new car June was the time to do it. So as would be expected there was a rush of people buying cars in June. This rush to buy cars has resulted in an unusual high value for car sales for this time of year, pushing up the total amount of retail sales.
As motor vehicles were the main driver of the recovery in retail sales in June we can ask ourselves will this continue? Can we count on the sale of motor vehicles to drive retail growth? The answer is that it is unlikely that the demand experience by car dealers in June will last. This higher demand was probably driven by people trying to purchase new cars before the scrappage scheme expired. With the scrappage scheme now gone, and with anyone who was going to buy a car probably after doing so to avail of the scrappage scheme, we can expect demand for cars to fall.
So if the one sector which was driving the domestic retail increase starts to contract, the overall outlook for retail trade is bleak. With the announcement of a €100 housing charge and a hard budget in December it is likely that individuals will continue to save any spare income that they have. This is bad news for retail outlets. It is also bad news for jobs. If people aren’t buying then there will inevitably be more shops cutting back on opening hours and staff. But this situation is likely to continue until economic conditions improve, and people are not fearing ever increasing tax hikes. Minister Noonan may have to wait until he sees a return to the types of retail spending experienced during the Celtic Tiger which he so desires.