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Consumer Market Monitor Quarter e 2012

The Consumer Market Monitor is designed to track key indicators of confidence and activity in the Irish consumer market as a resource for marketers and the wider business community.
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Overview

Data from the Monitor shows consumer spending is continuing the downward trend that it has been on for the last four years, though the rate of decline easedin Q2 2012. Consumer confidence in Ireland picked up slightly in the first half of 2012, but experienced a significant drop in September. This reflects an annual trend whereby confidence falls each autumn as the December budget approaches. Furthermore, the fall has been deeper each year over the past three years.

 

Mary Lambkin, Professor of Marketing, UCD Smurfit School, and one of the authors of the Monitor, said, “If this downward  trend in consumer spending continues we can expect a continuing decline in consumer confidence as we approach Christmas. Retail sales account for about 50% of consumer spending and combined with the looming December budget, this will have a serious knock-on effect for the sector. The retail sector, already in a very weak state, relies on the three months running up to Christmas for about 40% of their annual sales. While the retail sector saw a slight boost in Q3 with sales volume up 0.5%, overall they have continued to be weak in 2012.It seems paradoxical that the budget comes at a time when it can do maximum damage to consumer spending. Arguably, it would be better to time it for March or perhaps October, to avoid clashing with the peak retail season.”

 

The Consumer Market Monitor relies on a model of consumer behaviour which sees economic variables such as income levels, taxes, interest rates and exchange rates influencing consumer confidence which, in turn, influences consumer behaviour including spending, saving and borrowing. The Monitor uses quarterly data collected from sources including the Central Statistics Office (CSO), the Central Bank, the European Commission, and various other secondary sources.

 

Tom Trainor, Chief Executive, The Marketing Institute, said, “The consumer market accounts for 63% of GNP so it is an important indicator of the health of the overall economy. The savings ratio is continuing to rise in 2012, estimated to be as high as 13% for the year as a whole. However, despite this unprecedented rate of personal savings, over 80% of this saving is going into paying down debt rather than residing in bank accounts waiting to be spent.”

 

Key findings from the Consumer Market Monitor for Q3 2012 include:

  • Consumer spending continues downward trend for four consecutive years, though rate of declineeases in Q2.
  • Consumer Confidence picked up slightly in the first half of 2012.
  • Retail sales continue to be weak in 2012, down by -2.1% in Q1 and -1% in Q2 year-on-year in volume terms.
  • Slight boost in Retail sector in Q3: sales volume up 0.5% and value up 1.3% compared to the same period last year.
  • December Budget will have negative affect on Retail Sector.
  • Real consumption contracting at a rate of -0.4%, compared to last year.
  • Real disposable incomes begin to stabilise, with a decline of just 0.5% forecast for 2013 and modest level of growth from 2014.

Motor Trade

  • Sales have fallen again in 2012, down -3.2% in volume and -3.3% in value in Q3 compared to the same period in 2011.
  • For the year to September, 76,630 new cars were sold, down -12% on the same period last year (87,163).
  • 28,319 second hand cars were sold in the first three quarters of the year, down -8.7% from last year (31,021).

 

Essential products (including food and pharmaceuticals)

  • Held up well in the third quarter.
  • Food sales up 1.9% in volume and up 3.1% in value.
  • Non-specialised stores (supermarkets) up 2.1% in volume and up 3.4% in value.
  • Department stores up 2.4% in volume and up 2.4% in value.
  • Household equipment up 5.0% in volume and steady at 1% in value.
  • Pharmaceuticals and cosmetics up 2.3% in volume and up 1.2% in value.

Other retail categories:

  • Experienced overall declines in Q3 2012, year-on-year.
  • Fuel down -5.0% in volume, but up 3.2% in value.
  • Clothing, footwear & textiles down –1.4% in volume and -2.3% in value.
  • Books, stationery etc. down -7.3% in volume and -6.2% in value.
  • Bar sales down -3.4% in volume and -1.9% in value.

 

The Property Sector

  • Number of new mortgages up 7% (2,837) from the 2,643 issued for Q2 last year.
  • Lack of supply however is still an issue with 52% fewer houses on the market in August 2012 compared to last year.

 

Concluded Mary Lambkin, “As consumers brace themselves for another tough budget in early December the remainder of this year is expected to remain challenging, especially for the retail sector. However, various forecasts agree that the cutbacks in consumer spending may have run its course by next year as real disposable incomes begin to stabilise, with a modest level of growth returning from 2014 onwards. We hope that this will encourage and stimulate an increase in consumer confidence and in turn, an increase in consumer spending.”

 

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.

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