The Consumer Market Monitor Q3 shows how that all measures of consumer confidence have seen a definitive decline, and at an accelerating rate. General consumer spending in the Irish economy, which accounts for 50% of overall GNP (gross national product), is maintaining a downward trend this year. Spending was down -2.9% in Q1, -2.4% in Q2 with the official forecast now for a decline in real personal consumption of -2.6% overall for 2011. A further decline of -0.8% is expected in 2012.
VAT receipts, which are directly related to the amount of spending in the general economy, are down -4.5% for the ten months to the end of October 2011, a loss of €383m to the Exchequer.
The monitor, which tracks key indicators of confidence and activity in the Irish consumer market, highlights that all forms of borrowing have seen a progressive decline since the peak of 2008. Total household borrowing peaked in March 2008 at €150bn, but has declined steadily since then, to €128bn in September 2011, down -15% from the peak. Total lending to private households in Ireland was -4% lower on a year-to-year basis at the end of September 2011.
This trend correlates with the continued rise in personal savings by consumers which has increased further in 2011 to 12.9%, topping 2010’s peak of 12.3%. Personal savings are not expected to reduce by any great degree in the coming years as consumers prioritise repaying personal loans and mortgage debt over spending.
The reduced spending is also affected by consumers’ changing priorities; a desire to save and pay down debt has replaced the spending culture that prevailed during the boom years. The savings to income ratio has gone from a low of 3% in 2007 to a record high of 12.9% in Q1 2011.
Prices of essential utilities have increased substantially: the CPI (Consumer Price Index) is up 2.6% on average for the year to the end of September. Essential items are up more substantially, for e.g. Housing, Water, Electricity, Gas & Other Fuels (+8.9%), Miscellaneous Goods & Services (+6.5%), Transport (+4.2%), Communications (+4.1%) and Health (+3.4%).
The level of overall credit card debt has been declining at a consistent pace since 2008 and 2011 has been no different, down -8% in September year-on-year and down 11.7% from the peak in 2008. Residential mortgage lending, which accounts for 85% of all personal sector credit, peaked in September 2008 at €123bn but has declined every month since then, with a drop of -20% in September 2011 to €98bn.
Overall retail sales, which makes up about half of all consumer spending, were down by – 3.1% for Q3 and looks like ending the year at about this rate of decline. This compares to a growth of 1.4% in 2010, although the latter was partially stimulated by the car scrappage scheme. Excluding the motor trade, the decline in the third quarter was even greater, at -3.3%, and looks set to finish at an average of -3.4% for the year. This compares with a drop of -1.45% for 2010.
The Consumer Market Monitor uses quarterly data collected from sources including the Central Statistics Office (CSO), the Central Bank, the European Commission, and various other secondary sources.
About the author
The Consumer Market Monitor is a service provided by The Marketing Institute of Ireland in collaboration with the UCD Smurfit Graduate Business School.