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The Consumer Market Monitor - Q3 2018

Posted By The Marketing Institute & UCD Michael Smurfit Graduate Business School, Monday 19 November 2018
Updated: Friday 16 November 2018

consumer market monitor Q3 2018Looming deadline for Home Renovation Incentive drives household spending

 

- Strength of Irish economy drives record consumer spending of €105 billion in 2018
- Average spend of €16,400 across 130,000 home renovation projects
- Sales of household goods also continue to soar, up by 14%
- The drop in the value of sterling due to Brexit enhancing buying power

 

read report

 

Dublin, November 19, 2018: The latest Consumer Market Monitor (CMM), published today by the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School shows consumer spending continuing to grow strongly and likely to finish at €105 billion for this year, a new record and well above the last peak of €100 billion in 2007. Both retailing and services are doing well, up by 4 percent for the year and spending is matched by strong Vat returns which are up 5.5 percent this year.

The findings of the report revealed a continued surge in demand for household goods, with sales of hardware, furnishings and electrical goods surging by 14 percent, making it the highest growth sector of retailing in 2018. Furthermore, the Home Renovation Incentive scheme, due to expire on 31st December 2018, is incentivising households to invest heavily in the fabric of their homes, with 2018 spend expected to soar to a record €2.1 billion.

Professor Mary Lambkin, author of the report, said:  

In a market where houses for those trading-up or downsizing are in short supply, the Home Renovation Incentive tax incentive scheme has been a major factor driving the trend for home transformation, stimulating a lot of spending on household goods and enhancements, as well as being a considerable support for the building trades and related retail sectors. 12,179 building contractors have been involved in these projects and, given a multiplier of 2-3 for the number of trades contributing to these projects, that may have supported as many as 30,000 jobs.”

 

Tom Trainor, Chief Executive of the Marketing Institute of Ireland, said:

“Despite the uncertainty around the impact of Brexit on our economy, Irish consumer confidence is significantly higher than our European neighbours and there has been no apparent dampening of consumer spending, as both retail sales and spending on services have remained strong. However, we cannot take this for granted in the period ahead as Brexit plays out.

 

Booming Economy

According to the Q3 2018 Monitor, a strong economy has further enabled this trend. An increasing number of people employed, up by 3.4% year-on-year, together with expected pay increases of 3% in 2018, has led to a substantial uplift in the amount of disposable income circulating in the economy, expected to grow 4.4% to €108 billion in 2018. As a consequence, consumer spending rose by 3.6% in the first half of 2018 with full year spending forecast to be up by at least 3%, with further increases in 2019 and 2020.

Consumer spending has also been supported by improving household balance sheets mainly driven by the increasing value of peoples’ homes. Household net worth per capita now stands at €150,768, up 70% from the low of 2012. Perceptions of increasing wealth feed confidence and encourage consumers to release some of their perceived wealth for spending.

 

Household Equipment

Driven by the strong economy and the booming renovation market, sales of household equipment have been growing rapidly since 2014 and have been the highest growth sector of retail for several years. The volume of retail sales, which represents real growth having adjusted for inflation, has grown rapidly since 2014, and is now more than 50% ahead of the last peak in 2007.

The value of these sales remains 9% below the peak level, however, suggesting that prices are still lower than they were in the last boom. 

Some of the pickup in sales of household equipment has been driven by new homes, with purchasers having to equip them from scratch. From a low point of 8,300 in 2013, 20,000 new homes are expected to be connected in 2018 and a further 22,000 in 2019

Sales transactions across the residential property market are also increasing year on year and are expected to total 55,000 for this year, up from 50,000 in 2017. The expected increase in sales and supply, in 2019 and beyond, will inevitably add further fuel to this boom in sales.

 

Composition of Household Equipment

Household equipment is the sum of three categories of household items: furniture and lighting; hardware, paints and glass; and electrical goods. While all three categories are now experiencing strong growth, the level of growth has varied considerably.

Electrical goods recovered fastest from the recession and are now 42% higher in volume than at the last peak in 2007, and up by 20% for this year alone. Furniture and lighting comes next; it is  up 14% above the last peak, almost double its low point in 2012,  and up by 8% for this year to date.

The weakest category, relatively speaking, is hardware, paints and glass. This category’s close tie to construction explains why it has been slowest to recover. It is still down by 14% from the last peak in 2007 but is up by 33% from its lowest point in 2012. It has picked up particularly strongly this year, up by 10% in volume terms for the year to the end of September.

 

Retail Spending

Retail sales (excluding the motor trade) were very strong in 2017, up by 5.8% for the year in volume terms, and by 3.8% in value. This equated to spending of €40 billion which was back to the levels seen in the last boom.  This growth rate was paralleled by a high level of Vat returns which increased by 7.1% in 2017 for a total of €13 billion.

Retail sales have continued to grow in 2018 but at a slower rate, up by 3.9% in volume and 2% in value in the first half of the year. Growth accelerated in the third quarter, up 4.3% in volume and 3.7% in value year-on-year, and this momentum is expected to continue as we face into the final quarter and the holiday season. Vat receipts are moving in tandem, up 5% for the year to the end of September.

All retail categories reported good growth in Q3. Household equipment continued to be the fastest growing category, up 14.4%% in volume and 6.6% in value, year-on-year. Supermarkets and other food stores also performed well as did pharmacies and department stores, although clothing and footwear were a bit weaker, as were sales through bars.

 

  • Food sales up 5.1% in volume and up 4.0% in value;
  • Non-specialised stores (supermarkets) up 5.0% in volume and 4.0% in value;
  • Fuel up 1.8% in volume and 11.0% in value;
  • Clothing, footwear & textiles up 2.3% in volume and 1.7% in value;
  • Household equipment up 14.4% in volume and 6.6% in value;
  • Department stores up 5.9% in volume and 3.4% in value;
  • Pharmaceuticals and cosmetics up 6.2% in volume and 2.3% in value;
  • Bar sales static in volume but up 1.3% in value.
  • Books, newspapers and stationery up 4.0% in volume and 5.0% in value.

infographic consumer market monitor q3 2018

 

About the Author

 

Mary Lambkin

Mary Lambkin is Professor of Marketing in the UCD School of Business where she teaches courses to undergraduate and postgraduate students and is involved in a range of research projects under the general heading of marketing strategy.  She has written extensively on this subject in academic journals, and also writes commentaries on marketing topics of contemporary interest for professional publications. She has served as Head of the Marketing Group, as Dean of the UCD Business School and as a member of the Governing Authority of the university at various times, and also holds a number of positions in companies and professional organisations outside the university.


About UCD Michael Smurfit Graduate Business School

 

In 1964, University College Dublin became one of the first universities in Europe to offer the degree of Master of Business Administration (MBA).  In 1991, the graduate business school opened its own campus in Blackrock, County Dublin.  With over 100 faculty members, 1,300 students and 75,000 alumni worldwide, UCD Smurfit School is one of a small number of business schools worldwide and the only school in Ireland, to hold triple international accreditation (US - AACSB, European - EQUIS and UK – AMBA). The school’s programme has been consistently ranked among the leading European business schools’ programmes by the Economist and Financial Times, since 2000.

 

The School is also a member of CEMS and the Global Network for Advanced Management, which are alliances of leading global business schools.


About The Marketing Institute of Ireland

The Marketing Institute is the professional body for Ireland's marketing people. It exists “to enable marketers to build great brands and great careers”. It does this by sharing best practice, insights and expert content, building the community of marketers, and aiding marketers in career progression. The three themes of content, community and career underpin all Institute activities. The Marketing Institute also owns and operates the All Ireland Marketing Awards, the CMO Summit, and DMX Dublin, Ireland's largest marketing conference.

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