29 Mar 2019

Irish Economy: Retail sales growth picks up in February


Retail sales data from the CSO show that there was a 2.1% m/m increase in the volume of sales in February and a 1.7% m/m increase in the value of sales. On an annual basis, sales volumes were +5.1% y/y in February while sales values were +4.5% y/y, which represented the highest annual growth rates since October last year.



Data for the 13 individual industry segments show that sales volumes were higher over the past year in 12 of these, with  Bars the outlier here (-5.1%). The greatest increases came from those sectors that typically rely on consumers’ discretionary income – Electrical Goods (volumes +17.6% y/y; values +5.9% y/y), Furniture & Lighting (volumes +17.4% y/y; values +10.9% y/y) and Clothing & Footwear (volumes +9.3% y/y; values +8.0% y/y). Aside from Bars, the only category with a negative y/y performance was Department Stores, but only in value terms (-1.5%) with sales volumes in this category still positive (+1.3%) and indicating a degree of price discounting at play. The other category that we watch closely is Motor Trades, which rebounded in February (volumes +7.6% m/m) following a sluggish January (volumes -5.8% m/m).


As we discussed in the latest edition of our quarterly Irish Economy Monitor which was published on Monday, the outlook for the Irish consumer remains bright with good growth in employment and earnings likely to outweigh any Brexit-induced slump in sentiment.


Bank of Ireland Group: Securitisation to offload €375m of BTL loans

Bank of Ireland Group (BIRG) plans to offload up to €375m of Buy-to-Let (BTL) loans via a securitisation transaction in the coming weeks, after publishing a prospectus and arranging an investor roadshow for its Mulcair Securities DAC portfolio.


The portfolio is made up of previously restructured Irish BTL loans that are predominantly meeting their new repayment terms (just 2.5% of balances are in arrears, and no balances are in arrears of more than 90 days), but which remain classified for regulatory purposes as non-performing exposures. The average LTV on the portfolio is c.80% and the average balance c.€217k, with an average remaining term to maturity of 14 years. The proposed transaction is expected to result in a reduction in BIRG’s NPE ratio from 6.3% at the end of December to around 5.8% on a pro-forma basis.


BIRG management had flagged the potential for a deal of this nature when releasing its FY18 results at the end of February, and we see the proposed transaction as an incremental self-help positive in supporting management’s stated target of reducing NPEs to below 5% of gross loans and reducing asset quality tail risks remaining on the balance sheet.


Meaningless vote?

Yesterday it was confirmed that the UK Government would hold a vote on the Withdrawal Agreement today. The vote is scheduled for 2.30pm but there is a notable difference from the previous meaningful votes, with today’s vote being solely on the Withdrawal Agreement and excludes the Political Declaration which sets out the UK’s future arrangements. One reason for the change was to get around Speaker John Bercow’s insistence that a third meaningful vote would need to be on proposition that included substantial changes. In an attempt to secure more votes in support of her deal, PM May offered a path for her departure earlier this week but despite these overtures it remains an uphill task for PM May to win this afternoon’s vote given continued hold outs from ERG members and the DUP. If the UK Government were to lose this afternoon’s vote it would mean that the UK’s exit day would move to 12 April.



In its first estimate of Q4 GDP, the ONS calculated that the quarterly pace of growth had slowed to +0.2% from the +0.6% recorded in Q3. Further disappointment came from the full 2018 calendar year figures, which showed that growth had eased to a six-year low of 1.4%. Looking at the expenditure detail of Q4, a clear drag on GDP came from business investment which fell by 1.4% in its largest quarterly fall since Q1 2010. But while Brexit uncertainty looks to be weighing heavily on capital expenditure, households have continued to spend relatively unabated, with consumption rising 0.4% in Q4. The upcoming national accounts release will include the ONS’s second stab at Q4 GDP as well as the first insight into how much Britain relied on the ‘kindness of strangers’ by way of the balance of payments figures. This follows the shift to the new GDP publication calendar last summer which has resulted in the initial quarterly estimates encompassing a much higher data content than previously, thereby theoretically increasing its accuracy and making it less likely to be revised. Hence, we expect the release on Friday to show Q4 GDP growth unrevised at +0.2%. 


GfK’s Consumer Confidence Index

According to GfK’s Consumer Confidence Index, overall confidence stayed at the same level in March compared with the previous month at -13. And people’s perceptions of their personal financial situation over the past 12 months has held steady at a score of zero, although this is down from +3 a year ago.

GfK’s Consumer Confidence Index increased by one point in February to -13, with increases in three of the five categories. Brexit uncertainty has remained the dominant theme for consumers over recent months. But with no clarity on the eventual outcome of Brexit wrangling, the GfK’s consumer sentiment index has remained range bound between -13 and -14 since November.


Economic releases

09.30 UK GDP

09.45 EZ ECB’s Coeure Speaks

10.00 EZ CPI

13.25 US FOMC Member Williams Speaks

13.45 US Chicago PMI

14.00 US New Home Sales

14.30 UK Parliament Vote