The Consumer Market Monitor is a service provided by The Marketing Institute of Ireland in collaboration with the UCD Smurfit Graduate Business School. It 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.
Soaring Consumer Confidence Fuelling Virtuous Cycle of Spending and Jobs Growth – Report
Dublin, November 19, 2014: Soaring levels of consumer confidence have begun to drive increased consumer spending which is in turn creating employment growth throughout the economy. This is one of the key findings of the latest Consumer Market Monitor (CMM) published today by the Marketing Institute and UCD Michael Smurfit Graduate Business School. Data from the Q3 2014 Monitor indicates that the consumer economy in Ireland is now showing strong evidence of a broad-based recovery. Consumer confidence increased to a record high of +12 in Q3 2014 and this improving confidence has begun to feed through into consumer spending in many categories.
- Consumer confidence rose to +12 in Q3 2014, a record level, higher even than the boom years of 2006-2007, and significantly higher than our neighbouring countries.
- Improved levels of consumer confidence are being driven by steadily improving employment figures which are now beginning to have a positive effect on disposable incomes. The level of unemployment (11.0% in October 2014) now stands at the lowest level since March 2009.
- This strong consumer confidence has begun to feed through into consumer spending. Sales of new cars, which are a leading indicator in the consumer economy, experienced a major turnaround this year, with 86,894 new private cars sold to the end of September, up 30% on last year.
- General consumption expenditure was also up 1.2% in the first half of the year. Reflecting the increasing consumption, VAT receipts to the end of October of this year are 8.2% ahead of last year, and 3.8% ahead of target.
- The Central Bank is projecting an increase of 1.4% in the volume of consumption for 2014 as a whole, and a slightly stronger growth of 1.6% for 2015.
- Retail sales are also improving; sales volume excluding the motor trade is up by 3.4% for the year to the end of September, and value is up by 1.5%. Sales are particularly strong in household goods, with furniture and lighting up 19% in Q3 and electrical goods up 11.5%. The retail sales volume index is now back to exactly where it was in 2005, although it is still down -16% from the 2007 peak.
- There are optimistic forecasts for Christmas trade in Q4. Evidence from opinion polls suggests that shoppers finally have an appetite for Christmas spending, of a magnitude that we have not seen since before the recession.
Mary Lambkin, Professor of Marketing, UCD Smurfit School, and one of the authors of the Monitor, said “Consumer spending accounts for over 60% of GNP in Ireland and is a critical factor in driving recovery in the economy. Consumer spending is affected by the combined influences of how much money people have available to spend coupled with their confidence in spending it. Disposable incomes are at last beginning to show modest growth as a result of jobs growth and this, coupled with greater availability of credit, is leading to accelerated spending on many categories of goods and services. Overall, retail sales have turned a corner and are back on a growth path, although off a very low base.
Tom Trainor, Chief Executive, The Marketing Institute, said “We have been waiting for the green shoots of economic recovery for a long time in Ireland and especially in the consumer economy which has been particularly badly damaged in the recession. It is very heartening to see definite evidence that this sector is now recovering and this positive momentum will help to strengthen many businesses and allow them to grow and expand employment.”
In another important indicator property sales are also buoyant. There were 7,500 transactions in Q2 2014, up by 21% on the same period last year, and similar momentum in Q3. This is being assisted by an increase in the number of properties coming on the market, as well as by the wider availability of finance. Meanwhile lending to Irish households has continued to fall in 2014, decreasing by -8% by the end of Q3 2014, as households continue to try to get their borrowing down. By the end of Q1 2014, household debt stood at €164.3 billion in total, or €35,694 per capita.
Sales of essential products including food and fuel experienced modest growth in Q3 2014, while household equipment showed significant growth reflecting recovery in the housing market:
- Food sales up 1.9% in volume and up 1.0% in value;
- Non-specialised stores (supermarkets) up 2.3% in volume and 1.0% in value;
- Fuel up 2.6% in volume but down -0.3% in value;
- Clothing, footwear & textiles up 2.8% in volume and 1.4% in value;
- Household equipment up 9.7% in volume and 4.7% in value;
- Department stores up 4.0% in volume and 1.1% in value;
The Consumer Market Monitor relies on a model of consumer behaviour that 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.