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Consumer Market Monitor Quarter 3 2013

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

Consumer Confidence Highest Since 2006

Positive Jobs and Property Markets Contribute To Increase in Confidence

Data from the Monitor shows consumer confidence at a six-year high in September 2013, despite concerns about the impact of new household taxes and pay cuts on household finances.

 

Consumer confidence was up 5 points in the first half of 2013 compared to the same period of last year. July saw a drop in confidence, but this recovered in August, and confidence reached a six year peak in September, attributed to positive news in jobs and property markets.

 

Mary Lambkin, Professor of Marketing, UCD Smurfit School, and one of the authors of the Monitor, said: “Disposable incomes are still under pressure but consumer confidence has returned, a leading indicator of recovery in the consumer market. Increased car sales in recent months are another positive sign, as is the rise in the number of residential property sales. In addition, the fact that the Government budget was brought forward to October this year, and employment data continues to be positive, should help to ensure that confidence stays upbeat in the final quarter of the year.”

 

The news comes as a range of recent indicators point to a modest economic recovery, including the Ulster Bank Construction PMI which reached an eight year high, as well as news of Ireland’s imminent exit from its bailout.

 

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.

 

Key findings from CMM Q3 2013 include:

 

1.    Property transactions on the rise: There were over 10,900 home purchase transactions in the first half of 2013, an increase of 13% on last year. There were 6,000 transactions in the second quarter alone, compared to 5,200 in Q2 2012, an increase of 15%. Only 2,752 new mortgages were issued during that period, however, which suggests that half of these purchases were for cash. The outlook seems positive for the rest of the year with several banks having announced increases in their mortgage funding, coupled with evidence of strong demand in the market, particularly in the Dublin area.

 

2.    Loans for house purchases increased by 8% in December 2012, in a rush to avail of mortgage interest relief before it ended. Borrowing for house purchases increased further in 2013, up by 4% in the first half of 2013 year-on-year. Lending for house purchases stayed steady in the third quarter, but was up by 2% in September compared to the previous month.

 

3.    New car sales increase: There were 66,570 new private cars licensed in the year to the end of September 2013, a fall of -7% compared to the same period in 2012. However, there was a boost in July, as expected with the new registration system, and the number of new private cars continued to increase in August (up 21% to 4,504) and September (up 17% to 3,257) year-on-year.

 

4.    Used car sales buoyant: 37,437 used cars sold in the first three quarters of 2013, up 32% from 2012. 4,735 used cars were sold in September alone, an increase of 60% on September last year.

 

5.    Retail spending stabilises: Retail sales have continued to be weak but stable in 2013, up by a very modest 0.6% in volume in Q3 2013 year-on-year, and down by just -0.3% in value.

 

6.    Household spending up in 2012, from €78.2bn to €78.3bn, and has picked up this year, up 2% in the first half of 2013, compared to 2012. Some further recovery is expected for the remainder of this year due to a gradual improvement in labour market conditions and pickup in consumer confidence.

 

7.    Credit card debt declines: Credit card debt has continued to decline in 2013, down -10% in Q3, year-on-year, reflecting reduced consumer spending. Outstanding indebtedness on credit cards stood at €2.24 billion in September 2013, down from €3 billion at the peak in 2008, a drop of -26%. Despite the rapid reduction in credit, Irish households remain among the most indebted in Europe, with debt averaging 210% of disposable income. This compares with 157% in the UK and 123% in the US.

 

8.    Household lending continues to fall: Loans for house purchases account for over 70% of lending to households. Total household lending is continuing to fall in 2013, down by -4.5% in the first half, and by -4.3% in the third quarter.

 

9.    Consumer lending falls fastest: Other consumer lending peaked in Q1 2008 at €24 billion but had declined to €12 billion by December 2012, a drop of -50% from the peak, and of -5.5% for the year. This category is continuing to fall fastest of all, down -11% by the third quarter of this year.

 

Tom Trainor, Chief Executive, The Marketing Institute, said: “This quarter’s Consumer Market Monitor data shows that the Irish economy is improving slowly but steadily, but disposable incomes are still under pressure. Signs of improvement in the jobs and property markets may be making consumers a little more willing to spend. Against that, however, is the fact that the property tax is also a concern that may curtail 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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