The Property Tax as a Progressive Tax

The passing of the legislation for the (Local?) Property Tax and the announcements from the Revenue Commissioners of how they intend to collect it have once again put this relatively minor issue towards the top of the public debate.

The now-abolished €100 Household Charge was expected to raise €160 million in 2012 from the 1.6 million liable properties.  In 2013, it is expected that the half-rate Property Tax will raise €250 million – an increase of €90 million.  This is an average annual increase of €56 per household or a little more than €1 a week.

Is the Property Tax progressive?  Without detailed household income and property valuations it is difficult to say but an broad overview of income by tenure status suggests it is.  This is a table from the 2009/10 Household Budget Survey.

[This is data up to 2010.  The recently released Survey on Income and Living Conditions put gross weekly household income at €1,015 in 2011, a 1.1% drop on the above figure.]

Owner-occupiers have higher incomes than other categories.  The group who own their home outright have an average annual gross household income (direct income plus state transfers) of nearly €47,000, while owner-occupiers with a mortgage had an average annual gross household income of €75,000.  If is, of course, the case that averages only provide a partial picture and a fuller insight into the distribution would be better.  Alas it is not available.

Households living in rental accommodation have lower gross incomes than owner-occupiers and are not legally liable for the Property Tax (though determining the economic incidence of the tax is difficult).

There are around 1.15 million owner-occupied homes in Ireland, roughly even divided between those who own their home outright and those who have a mortgage on their home.  There are around 450,000 households in rented accommodation with 150,000 renting from a local authority or voluntary body and the other 300,000 households renting from a private landlord.

Finally, here is an extract from a table in the SILC on disposable income (gross income after direct taxation) though it doesn’t break down home-owners into mortgaged/non-mortgaged households.

Retail Sales slip again

With December’s retail sales failing to live to the the Xmas hype, today’s release of the January 2013 Retail Sales Index does little to alter the landscape.  Retail sales excluding the motor trade fell on a seasonally adjusted basis in January.  The fall was greatest in the volume series which has given up more than half of the increase that occurred in the six months after June 2012.

On an annual basis both the volume and value indices are above where they were at the same time last year (but only just).

The monthly volatility in the series is evident  but after a sequence of four monthly increases both the volume and value series have recorded monthly declines in two of the past three months.

Turning the corner? Caveat emptor.  We’ve been offered that pup before.

Where was the Xmas “surge” in Retail Sales?

The CSO have released the December 2012 Retail Sales Index.  There is something missing from the data – the much heralded “surge” in retail sales that apparently took place around the Christmas period.  Here is the core retail sales index which excludes the Motor Trades.

There was an increase in December but only marginally.  The trend in retail sales is up but this data do not reflect what was feted as “the best Christmas for retailers since 2007”.  Here it might be a little instructive to use the unadjusted series that just looks at the amount of retail sales without taking seasonal factors into account.  This chart has the unadjusted series for core retail sales (with December 2008 equal to 100).

Unsurprisingly there is a spike in retail sales each December.  At 94.2, this year’s December peak was higher than each of the last two years (92.5 in 2010 and 93.3 in 2011 using the base in the chart) but was below both 2008 (100) and 2009 (94.7).

Maybe we are not looking in the right place.  It would be great if the CSO provided a resource that allowed us to create selected sub-indices from the categories provided.  The retail sales shown in the above charts include fuel, furniture, hardware, medicines and other categories which were likely excluded when Retail Excellence Ireland were making their seasonal claims.  These items only make up about one-fifth of the indices shown above so their effect is unlikely to be significant.

Although limited we can use one of the indices to check for the retail surge.  Non-food sales in Department Stores are only about 1/12th of the above indices but might be expected to reflect the broader pattern in Christmas shopping.  Here are the unadjusted series.

That seems more like it.  The volume of non-food sales in Department Stores in December 2012 was indeed the highest since 2007.  In fact, volume was nearly 20% higher than 2008.  However, the value index was identical.  See here.  The adjusted series also shows a jump last month.

And this also shows that the trend in sales in Department Stores has been positive since about April of last year.  However, apart from Department Stores it is hard to find evidence of the Christmas surge.  Sales in bars did jump 5% in December but the underlying trend in this sector is unmistakeable.

The retails sales of electrical goods (computers and peripherals, televisions, radios and DVD players, games consoles and software and telecommunications equipment) has been positive in recent months (in volume terms at least). 

The recent jump was due to the digital switchover in October rather than any pre-Xmas exuberance.  Even still, the volume in this category in December was up 4% on last year, though the value of sales was down by around 1%.

It looks like the warning at the end of this post that “the plural of anecdote is not data” is borne out by the above data.

Retail Sales slip

There isn’t much that goes to plan in the Irish economy but a monthly drop in November’s retail sales after the fillip offered by the digital switchover at the end of October went as expected.  This is from the November Retail Sales Index published by the CSO today.

Retail sales had been on an upward trajectory since July and are still well ahead of the June levels but the annual growth that was seen in the three months is no longer present.  In order for the annual change to remain above zero for December, monthly growth of around 0.5% will have to be seen.

The monthly changes continue to be volatile and as indicated above November recorded the first monthly declines since June.

Although electrical goods showed the expected decline (down 18% by volume on the month) there were falls in nine of the 13 business categories reported by the CSO.  Monthly volume falls in excess of 1% were also recorded for:

• Food beverages & Tobacco –1.7%
• Fuel – 3.2%
• Books, Newspapers and Stationery –1.5%
• Other Retail Sales –1.8%

The categories showing a monthly volume increase were:

• Non-Specialised Stores +0.1%
• Department Stores +2.4%
• Furniture and Lighting +2.7%
• Bars +3.2%

There has been a lot of talk of strong retail sales in the run to Christmas and in the post-Christmas sales.  It will be next month’s RSI before this will be seen.  Retail Excellence Ireland have been particularly bullish in the past few weeks but at the end of November (the time the above data was being collected) they issued this press release.

NOVEMBER 27TH 2012
Irish retailers are predicting a drop of -0.47% in Christmas 2012 Trading, according to a survey published today by Retail Excellence Ireland (REI), Ireland’s largest retail industry trade body.

The December 2012 and January 2013 Retail Sales Index releases will show us whether things went to this plan.

Retail Sales rise again, but…

The release by the CSO of the October Retail Sales Index contained one predictable result: the sales of Electrical Goods rocketed (in advance of the shutdown of the analogue broadcast signal for television).

This increase will distort the changes in broader measures of retail sales.  A core measure of retails sales excluding the motor trades rose in October.  The motor trades category has a weight of 18.2% in the October index so this represents 81.2% of the index.

In October, the electrical goods category makes up 4.9% of this core measure of retail sales so comprise about one-twentieth of the total above.
One an annual basis core retail sales have been showing positive changes for three months but the jump in October to a 4% annual rise by value and 3.5% by volume was significantly boosted by electrical goods.

On a monthly basis core sales in October rose by around 1.3% in both value and volume terms. 

The 25% rise in electrical goods means that this category alone would have contributed almost all of the monthly rise in October. [On a very crude basis the rise in electrical goods multiplied by its weight in the core index gives 0.25 x 0.05 = 0. 0125, or 1.25%.  All the series in the dataset are individually seasonally adjusted so such a comparison is not sound].
But assuming that the jump in electrical sales hadn’t happened and further assuming that the index had remained at its September level, then both the volume and value indices would be showing an annual rise of around 2.3% in October.  This is only a modest rise in comparison to the drops that preceded it, and since the positive rise in July retail sales have been relatively static since (excluding the electrical goods bounce in October with a more minor impact on September).
The arithmetic average the value and volume indices for the first ten months of 2012 is almost identical to the same measure from 2011.  Stabilisation? Yes. Improvement? Not yet.

Retail Sales Index for August

The CSO’s Retail Sales Index for August generated some modest positive reaction as both monthly and annual rises were recorded in the series to August.  The core retail sales index (excluding motor trades) has risen in value and volume terms for the past two months.  However, these rises have only seen seen sales clawback part of the drop registered in June: both the value and volume series remain below the levels recorded in May.



The annual change of both series nudged into positive numbers in August but there is little to suggest that this will be maintained.



The monthly changes continue to oscillate around zero.

Retail Sales going nowhere

The release by the CSO of the provisional July figures for the Retail Sales Index continue to show a sector that is moribund.  Here is the retail sales index excluding the motor trades (which have a 21.6% weighting in the overall index for July).

Monthly increases in the indices are not unusual; what is unusual a sequence of positive monthly increases.  During 2008 and 2009 the series fell precipitously.  This fall moderated during 2010 and the pattern since has been monthly fluctuations around a slightly falling trend-line.  The annual changes reflect this pattern.

Finally, here are the monthly changes in the series which highlight the inconsistency of the monthly changes.

Retail Sales are only stabilising

Yesterday’s release of December’s Retail Sales Index has led to some reasonably upbeat headlines.

• RTE: Stronger spending finish to 2011 – CSO
• Irish Independent: Festive shoppers hike sales by 3pm for retailers
• Irish Times: Retailers get December boost as sales rise by 3%

Retail sales did rise towards the end of the year but the 3% figure for December is for the All-Business Index.  This includes the Motor Trades which even in December has a significant impact on the index.  The Motor Trades weighting for December is 8% (for January it is 35%). 

Instead we will focus on ‘core’ retail sales which strips out the effect of the Motor Trades.  Here is this index since the start of 2008.

The drops seen in 2008 and 2009 have eased but signs of a sustained recovery remain absent.  Although there was an increase in retail sales towards the end of the year the ‘bump’ occurred in November, not December.  December showed a small monthly increase in sales by volume (+0.2%) but there was a decrease in value index (-0.1%). 

[Sales in December are going to be much greater than those in November but the Retail Sales Index is adjusted for such seasonal patterns and the monthly weightings given to each sector also reflect this seasonality.]

One positive-looking graph is the annual changes in the value (+1.1%) and volume (+0.7%)indices.  These are both positive for the first time since March 2008.  We must be wary though.  The CSO can adjust the index for seasonal consumption patterns but they cannot adjust the series for seasonal weather patterns.  Sales last December were disrupted by a cold snap that brought snow and ice. 

It will only be over the coming months that we will know if the bump seen in November will be maintained.  It is difficult to see how the annual rates will stay positive next month.  There will have to be a monthly increase in sales value of 2% in January just to ensure that the Value Index does not have a negative annual change.

Here are the monthly changes showing that the recent bump occurred in November.

Retail Sales continue down

The CSO have just published the August update of the Retail Sales Index.  As is usual we will look at ‘core’ retail sales which strips out the effect of the motor trades, which make up 21% of the August Index. 

Core retail sales fell yet again in August as can be seen here.

Compared to July, retail were 0.8% lower by value and 0.5% lower by volume.  For the eight months so far this year there have been three months when retail sales have risen and five months when retail sales have fallen.

The annual comparison also deteriorated in August.  By value retail sales are 2.9% lower than they were a year ago; by volume they are 3.7% lower.  We have to go back to May 2010 to find the last instance when one of the measures was positive.

Retail Sales; Tourist Numbers

The release of the July Retail Sales Index shows a slight rise in retail sales.  Core retail sales (excluding motor trades which make up 21.6% of the July index) rose by by both value and volume when compared to June.

The monthly rise is not suggesting that the decline in retail sales is over and the annual changes for both the value and volume series remained negative as has been the case for over a year now.

The monthly changes show the volatility that highlight that a monthly swing is not to be considered a change in the long run momentum of the series.

One factor related to sales in Ireland (and not confined to retail sales) is the number of visitors from abroad.  An increase in visitors should lead to an increase in consumption. 

The CSO’s Overseas Travel release shows that in the first six months of 2011 there were 3.0 million visitors from abroad compared to 2.6 million in 2010 – an increase of 13%.

Separate data in Table 13 from the CSO’s National Income and Expenditure Accounts show that non-residents spent €3.1 billion in the economy in 2010.  If the 13% increase in numbers is maintained for the year and corresponds to a similar increase in expenditure by non-residents then consumption in this category will rise to around €3.5 billion.

Retail sales slide again

The CSO has just released the June update of the Retail Sales Index.  The first impressions are that retail sales are rising and some media reports reflect this (Irish Times: Retail Sales Rise in June).  It is true that the overall index is up 0.2% on June of last year, but if we strip out the effect of the motor trades a somewhat different picture emerges.

The motor trades category makes up 23.2% of the retail sales index in June and the motor trades had an artificial jump in June created by the closing of the car scrappage scheme.  By volume motor trade sales were 22% up on the same time last year. 

What do we see when we look at the other three-quarters of the index?

This is no where near as positive as the overall index (graph here).  The best that can be said about the above graph is that the rate of decline seen since March eased somewhat in June.  However, as has been said over and over in this crisis, “getting worse more slowly is not the same as getting better”.  Retail sales are continuing to decline.

The relative improvement compared to the last few months can be seen when we look at the monthly changes but both series remain below the zero line.

The annual changes show how moribund retail sales remain.

Retail Sales Index Falls Again

The May Retail Sales Index was released by the CSO earlier today.  The up-down volatility in the series that was seen around the turn of the year has now been replaced by downward momentum.

Both the value and volume series are now down to the minimums there were recorded last December.  The drop to these levels in December was largely influenced by the extreme cold weather that the country experienced.  There is no such meteorological explanation for the return to these levels in May.

Unsurprising, the annual changes are moving further away from zero.  Value is now 3.5% behind last year and volume 5.1% down on last year.  We had expected that the annual comparisons around now would be negative even if the index had managed to stop falling. It hasn’t and the annual drops are getting larger.

The recent volatility is highlighted by the monthly changes but the jumps from positive to negative have been replaced by a series of negative monthly changes.  It must be all those pesky savers!

Per Capita Consumption Resumes Fall

The release of the Q1 2011 National Accounts yesterday has sparked a variety of responses such is the inconsistency in the figures between differing quarterly changes in GDP and GNP as well as substantial revisions to the annual figures to 2010.

Here is a chart that uses two CSO data series:

1. Quarterly estimate of private consumption at constant market prices (seasonally adjusted)
2. Quarterly estimate of the population aged 15 plus from the QNHS

Although the CSO may not approve we will use these to create a rather crude measure of per capita consumption.  There are probably a number of difficulties with this approach which was prompted by a comment on recent falls in the Retail Sales Index.  Is the index falling because people are spending less as a result of decreased incomes or is the index falling because there are less people to spend as a result of outward migration?  We attempt to address that here.

So what do we see when we divide 1 by 2?

After flat lining for four quarters from the end of 2009, this series turned downward in the final quarter of 2010 and this has continued into 2011.  Per capita consumption fell 1.7% in the quarter and is down 2.5% on the year.  We can see that the most severe fall occurred during 2008 and we are now 11.5% below Q1 2008. 

It did appear that through 2009 and 2010 the worst of the fall was behind us but the start of 2011 undermines that view with per capita consumption resuming its downward path. This will not be to the approval of Minister for Finance, Michael Noonan based on this report.

In an appeal aimed at those Irish people who are holding a total of €134bn in savings accounts, Mr Noonan said it was time to return to normal shopping habits.

"What we really need is for people to go into the shops and start buying again,'' said Mr Noonan in a message to those who had the cash to spare.

“If that starts, with tourists visiting our shores stimulating the retail side, and is followed by our own ordinary citizens going about their shopping and beginning to spend again, then we begin to lift out of the crisis," he said.

Retail Sales slip again

The April Retail Sales Index has been published by the Central Statistics Office.  The volatility that has seen the core series fall, rise, fall, rise over the previous four months continued into April, when March’s rise was followed by a fall in April.

Here is the retail sales index excluding motor trades.

The gap between the value and volume series has been narrowing in recent months, though this has been driven more by the continued fall in the volume series rather than any significant rise in the value series. 

The volume series has fallen and is now only higher then when the severe weather resulted in a sharp downswing last December.  The value series has performed slightly better and although it is down 2.4% on the year it is still at the same level as was recorded last July.  It should be noted that this has more to do with rising prices than increased spending.

The annual changes reflect these patterns with the annual changes in the volume index falling below the annual changes in the value index.  This has not been a feature of the recession to date that has generally seen the value index fall at a faster rate than the volume index. 

Here are the monthly changes which as stated above have moved from positive to negative for each of the past five months.

Slight uptick in Retail Sales

The March Retail Sales Index has been released by the CSO.  Core retail sales are showing a slight improvement on the February levels.  Nothing huge, but both the value and volume series edged upwards.

As expected the annual changes remain negative as the first quarter 2011 figures are being compared against the short-lived “turning the corner” momentum of early 2010.

The volatility in the monthly changes continues.  The severe weather in December is a major factor in this but we can expect to be able to read more from these over the coming months.

February Retail Sales

The CSO have just released the February Retail Sales Index.  The big jump reported in January was not maintained and retail sales by value and volume slipped back again in February. 

As per usual, we will focus on the sales index that excludes motor sales.  The overall number for February is very heavily skewed towards the motor trade which makes up 33% of the index in February.  Another reason to exclude the motor trade is because it includes the full value of all cars sold.  From a household point of view, the decision to purchase a car will be made on the difference between the cost of the car purchased and the trade-in value of the car sold.  Anyway here are the numbers.

Only some of the January gains were given up, but the volume index is still lower than it  was in November.  The value index has performed somewhat better, and apart from January, is at a higher level than very month since September.  This is likely influenced by the end of the deflation measured by the CPI.

Although changes to recent months are positive on an annual basis retail sales are still down on last year.

Since July 2008 there has only being one positive change in either annual change series (the volume index in April 2010).  Over recent months both series did get close to breaking into positive territory but fell away each time.  It is clear that the huge slow down in consumer spending seen in 2009 has eased, but all we have it apparent stabilisation rather than real recovery.  February was the first month where the volume series showed a  significantly lower annual change than the value series.

The monthly changes are a bit more volatile and reflect adverse weather in December, early January sales and other factors.

Retail Sales spike

After plunging in December (slipping on the ice?) retail sales spiked upwards in January.  Again we focus on the index that excludes motor trades.  This is only 64% of the overall index for January as new car sales are at their highest during this month.

We can see that the big drops seen in December, particularly for the volume index, were largely recovered in January.  The recent volatility (and cold weather) makes monthly comparisons difficult.  This is reflected in the recent monthly changes.

The annual changes provide a much more steady comparison and we can see that retail sales continue to show a year-on-year decline.  This decline is substantially lower than the rates seen in 2009 and it is notable that the rates of decline of the value and volume indices have converged.

This converging of the rates of change suggests that the effects of deflation on retail sales are being diminished.