Retail hit hardest as households put €3bn into savings

April spending lowest since financial crisis as virus fears make nervous shoppers hold onto their cash

RETAIL sales fell off a cliff in April and recorded their steepest drop since the worst days of the financial crisis as the coronavirus pandemic kept consumers locked down in their homes and household savings took a record jump.

Data from the Central Statistics Office (CSO) released yesterday showed that retail sales fell by 35.4pc in April from March – more than double the pace of the 16.8pc decline recorded in January 2009 as the financial crisis erupted.

On an annual basis, sales dropped by 43.3pc for April, when Ireland introduced some of the toughest lockdown rules in Europe in a bid to stem the spread of Covid-19.

Those who did spend money largely purchased food and other essentials. There was big shift to online sales, which shot up to a record 15.5pc of the total turnover for all businesses in April. That figure is five times the pre-pandemic monthly level.

There are now 580,000 people depending on Government financial aid to survive, finding themselves out of work as a result of the lockdowns. They are getting €350 a week in pandemic payments.

In addition, there are now 215,000 on the regular unemployment rolls.

The scale of the pandemic shock also was shown in a record €3bn surge in savings by households in April and by a sharp drop in borrowing, according to a Central Bank of Ireland report.

“The growth in deposits is likely to reflect the reduced consumption due to the Covid19 containment measures,” the bank said.

Personal borrowing fell by a dramatic €277m in the month.

“This is the largest monthly decline since early 2014,” the Central Bank said.

There is also evidence of precautionary saving by companies outside of the finance sector. Their deposits increased by €1.2bn last month.

“This level of inflows is not unusual in recent years but may highlight an increased focus on cash management given the current economic environment,” the bank said.

Some believe that the large build-up in savings means that once the lockdown restrictions are lifted, the economy will bounce back quickly as consumers will have far more money to spend.

John FitzGerald, an economist writing for the Economic and Social Research Institute, estimated that the savings rate could double to almost 20pc this year. As it is spent, this cash pile could provide a considerable stimulus for the economy in 2021 or 2022.

However, that view rests on incomes being maintained at current levels.

Other economists believe that people will be so worried about the risks of a second wave of infections, and scarred by the possibility of losing their jobs, that they will boost their level of savings permanently as an insurance measure, causing consumer spending to remain weak.

Google mobility tracking data shows that retail and recreation trips on May 21 were down 60pc from the pre-Covid era, an improvement from the precipitous drop of 80pc suffered in April.