The latest official retail sales data from the CSO, released yesterday, were much as expected. Headline sales were up 0.6% in the month in volume terms in December and were 3.0% higher in the year, following an annual increase of 2.0% in November. Excluding motor trades, sales were up 1.4% in the month and were 3.0% higher in the year. <p>

The second half of 2013 was a lot stronger than the first half of the year. For 2013 as a whole, headline retail sales were up 0.7% on average in volume terms, while the increase was 0.8% when motor trades are excluded. <p>

Consumer sentiment hit a six-and-a-half year high in December and anecdotal evidence suggests the post-Christmas sales were quite robust and new car sales in the first half of January were up almost 40% on the same period last year.<p>

A key issue going forward will be the state of the labour market, and the signs are encouraging on this front as we’ve seen with the most recent official employment data and the Live Register in recent months. Having peaked in February 2012, the unemployment rate has fallen steadily since. A continuation of this trend in 2014 will be reflected in stronger retail sales in our view. <p>

<B>However, overall personal expenditure on goods and services for 2013 as a whole as per the National Accounts looks set to be negative again. Still, we remain optimistic that buoyed by an improving labour market, consumer spending will this year for the first time since 2010 make a positive contribution to GDP growth.
<p><h5>Alan McQuaid</h5>



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