That’s the conclusion of Retail Ireland, as reported in the Irish Times last week on the back of the CSO’s Retail Sales Index figures.  The CSO report that the volume of retail sales decreased by 14.1% in 2009 when compared to 2008 and decreased by 18.0% in value terms.  This was on top of a drop of volume of retail sales of 6.1% and in value of 4.5% in 2008 compared to 2007.  All retail sectors showed a decline with the most significant year on year fall in the motor trade with volume of sales down 15.1% (20.1% in value terms), with non-specialised stores (includes supermarkets) down 3.5% (9.2% in value terms).  All the indication from pundits is that the volume and value of retail sales will continue to fall in 2010, not unsurprisingly given the tightening of purse strings across the country as more and more people join the Live Register, the cuts to public sector take home pay, and most people becoming more cautious, saving rather than spending.

The worry is that we become firmly stuck in a deflationary spiral where as spending contracts, retailers and their suppliers come under pressure and start to let staff go or shut up shop, which then adds to the number of people tightening purse strings, which reduces demand and spend, and so the circle goes round.  Moreover, in this scenario it is likely that indigenous shops and producers will suffer the most, unable to compete with the bigger (overseas) chains who will potentially suck more capital out of the Irish economy.  Retail Ireland is seeking a 10%  rebate on commercial rates paid in 2009, a reduction in VAT for a specific period to stimulate sales, and government intervention in the rental market, service costs and labour rates.  This may seemingly help them in the short term, but what’s really needed is a shift to stimulate the wider economy and to create employment that will put money back in peoples’ pockets and will help breed consumer confidence to start spending again.

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