Spanish retail sales plunge to new lows this morning. Hardly surprising that retail sales are poor in Spain currently but it looks like a pretty dramatic fall off a cliff. Last month retail sales in Spain showed a 2% contraction. Retail sales this month came in at at rather worse 10% contraction so a rather worrying trend forming there. Many will point to how austerity regimes are hurting economies rather than helping them but that to me is a bit of a short-term reaction. Things have to get worse before they get better. That’s the pain of deleveraging.
In contrast of Spain and support of austerity regimes Ireland printed a positive retail sales figure last week and a gain on the previous month. While I will not be as bold as to call a bottom to the recession in Ireland it certainly appears to be on the right tracks. There is still of course potential for double dip as there always is but you could point to how the effective “poster boys ” for austerity have evolved and showings signs of a recovery. I wont get on to a debate on the physcology behind why Ireland seemed to bend to the austerity regime easier than our more southern European neighbours like Greece and Spain. I’m sure there was a lot of grumbling and a few strikes but it seemed like there was not the same backlash against austerity in terms of rioting on the streets as there was in our more fiery neighbours lands. Perhaps this “keep calm and carry on” attitude has shown that austerity can work when you get the buy in or at least compliance of the people.
At worst Irish retail sales plunged to -15% back in 09 and since then there have been a few bumps along the way but for the most of it we have been hovering above and below the zero growth area for a while now. With our presence back in the debt markets and yields falling through relatively natural causes i.e pre EU government debt backstop Ireland has a very good shot at emerging from this malaise if and when there is a sniff of global growth. It is all well and good to say we have done our bit and taken it on the chin and got on with it but we are also at the mercy of international markets and need some signs of recovery around the world to really set Ireland on the correct path. I do feel though that our acceptance of the austerity regime will stand to us in the future and should have put us in good standing with the EU, IMF and global trading partners, what we need know is to capitalise on this.