Irish Retail Sales Volumes Expand in December

Ireland's economy is not doing particularly well; however, the consumer portion seems to be holding up better than expected. Nominal retail sales (excluding auto sales) in December rose by 0.8% while real (ex-auto) retail sales rose by 0.3%. The inflation adjusted series rose by 1.9% over 12 months, fell at a 3.3% annual rate over six months and rose at an annualized rate by 5.1% over three months.

The nominal figures get the most notice, but of course, we are mostly concerned with sales in real terms.

In real terms, Irish sales (excluding motor vehicles) are up at a 3.9% pace in 2023-Q4 (in the just completed quarter for retail sales data). Food & beverage spending is up at a 3.7% pace. Clothing & textile spending is falling at a 5.5% annual rate. Total retail sales volumes are falling at a 0.8% annual rate in the fourth quarter.

Retail sales are showing some resilience at a time that Irish domestic data are weak. Irish manufacturing PMI reading continue to skim along below a level of 50 indicating contraction while service sector readings are easing but holding above a PMI value of 50, showing some growth.

The direct Irish industrial production gauge (as opposed to a PMI proxy) makes no bones about weakness and on data though November shows a year-on-year drop of more than 20%. Irish GDP has fallen quarter-over-quarter for three quarters running, including a 4.8% annualized drop in 2023-Q4.

Like inflation everywhere else, Irish inflation is excessive with respect to the ECB’s EMU-wide target of 2%. Inflation in Ireland is in a 4% to 6% range between the headline and the core on data up-to-date though December. Headline inflation has fallen fastest, but core inflation is headed lower at a more moderate pace.

Ireland fits into the picture of weak current growth that signals recession and inflation that is on its way down from way too high to still too high. The ECB will, of course, make monetary policy for the whole of the monetary union, but Ireland does not seem out of step with that. For example, Germany, the largest EMU economy, also is struggling and has still-positive nominal retail sales, with real sales beginning to contract, a weakened and contracting manufacturing sector, contracting Real GDP, with inflation falling and dropping faster than in Ireland.

As always, the ECB has a problem making one monetary policy for a multi-country union. Of course, the U.S. is a large region and U.S. regions often have significant differences and yet there is only one policy in the U.S. However, in Europe all these countries have and touted individual statistics are factors that alert people across the Monetary Union as to their individual plight more so that people are so-alerted in America. At present, divergence does not seem to be a major issue in the EMU and certainly not for Ireland.