Friday 26 December 2014

Consumer confidence hits six-year high but taxes still a threat

Published 15/11/2013 | 01:00

CONSUMER confidence hit a six-year high in September, according to new data.

The survey was conducted before last month's Budget, the latest controversy surrounding the property tax, or the revelations this week about the increases set to be imposed on health insurance premiums.

But it points to an improving mood among the public, and it's not the first survey to do it.

The study from UCD's Michael Smurfit Graduate Business School and the Market Institute of Ireland concludes that declining unemployment was one of the drivers behind the increased optimism.

Mary Lambkin, UCD professor of marketing, said that while disposable incomes remain under pressure, consumer confidence has returned.

"Increased car sales in recent months are another positive sign, as is the rise in the number of residential property sales," Ms Lambkin said.

"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 Purchasing Managers' Index which reached an eight-year high.

And on Wednesday data from Europe showed that Ireland recorded the highest increase in industrial production of all member states in September.

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 various sources including the Central Statistics Office, the Central Bank, the European Commission, and various other secondary sources.

Although a welcome sign, very real difficulties remain that could dent the rise in confidence.

Finance Minister Michael Noonan said this week that there are signs of improving domestic demand since the Budget but it could very well be the case that confidence was impacted by the measures outlined on October 15 last.

In addition, families are facing yet another rise in the cost of their health insurance thanks to a new hike imposed by Health Minister James Reilly, which is likely also to be a drag on confidence.

And don't forget next year is the first full year of the property tax, with the controversy surrounding the payment options causing quite a stir in recent weeks.

The data all points in the right direction. The trick is to ensure the mood music can be sustained.

Tom Trainor, Marketing Institute chief executive, said 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," Mr Trainor said.

"Against that, however, is the fact that the property tax is also a concern that may curtail spending."

Irish Independent

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