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Saturday 23 September 2017

Consumers now feel more buoyant but they don't want to rock the boat

Caution is the watchword on spending despite an upturn in confidence, particularly among the young, writes Paul Moran

Paul Moran

The second part of our Sunday Independent/Kantar Millward Brown consumer-sentiment study, conducted late last month, sought to better understand the population's behaviour in terms of spending habits; how have they changed over the past two years as the economy improved, and how they anticipate things changing over the next 12 months.

Financial sentiment from a more intangible point of view is buoyant, but it is intriguing to map this against how the public acts in terms of their spending behaviour. Optimism for the future is high, and they feel financially better off than they have been, but consumers are under no illusions - they are not being overly flaithulach with this newfound confidence.

When asked if they have increased their discretionary spending over the past two years, nearly one-in-five claim that they have - contrast this with a similar poll nearly five years ago, in the depths of the recession: just 7pc opted for the same. While the percentage of those stating that they have cut back has shrunk dramatically (62pc down to 28pc), what is most striking is that, despite our newfound optimism, nearly half (44pc) are holding steady.

It points to a picture of a nation seemingly buoyant, but cautious, all the same. We have been burnt before, and don't want to go back to that place again.

Those who have loosened the purse strings over the past couple of years tend to be younger, and more likely to be living in the capital - reflecting a fault line in terms of the haves and have-nots.

This geographical reality runs parallel with all economic indicators - Dublin seems to be disproportionately benefiting from the resurgent economy, with the rest of the nation playing catch-up.

So what of the future? Where does the nation see itself over the next 12 months? Projected spending is on the up. Across all categories, the proportion of those stating they intend to spend more in the coming year has increased significantly.

However, again there are some interesting trends behind the headline statistics - there are many imbalances on what we think we are going to do, but also who is going to be splashing the cash. Reflecting a more prudential psyche, the largest attraction for those with discretionary spend is to funnel it into savings/investments. Nearly one-in-five (19pc) of the population believe they will do more of this over the next 12 months - up from just 7pc in 2012.

The next most important priority is for money to be invested in home improvements/renovations (17pc). Both savings and renovations were heavy casualties during the recession, and it now seems as if the public is returning to these perceived safeholds.

Other categories that have seen notable growth in projected spend include us taking time out, be it for weekend breaks in Ireland (15pc vs 4pc previously) and foreign holidays (13pc vs 3pc before). Similarly, the percentage of those intending to eat out more in restaurants has seen an uplift (up 10 to 12pc).

What is striking about our future spending behaviour is who is driving it. Demographically, distinct patterns emerge. As you would expect, those higher up the socio-economic ladder (ABC1s) are much more likely to feel that the next 12 months will be a time of increased spending.

Reflecting a new paradigm, Generation Z (18-to-24-year-olds) are most upbeat in their spending habits - they are growing up at a time where recession, for many of them, is a footnote. They are consistently more likely to express positive spending intentions. Of course, from an economic point of view, they have less spending power, and their outgoings are more likely to be transient (pubs, clothes, restaurants, holidays). In addition, they do not have the baggage of more humdrum realities such as bills.

Dubliners are by far the most upbeat in terms of their spending power next year -they consistently over-index against other regions in nearly all categories. They are closely followed by those in their economic hinterland - those living in Leinster. Those living in Connacht/Ulster under-index on all categories of future spend. For many of them, the new-found fiscal uplift is no more than a mirage.

However, reflecting our cautiousness, the biggest increases across the board are among those stating that they will not change their spending patterns; we hope that we are not going to lose the run of ourselves this time out. This may reflect that, regardless of our perceived sense of financial well-being (for some, at least), we recognise that there are, potentially, some severe headwinds ahead.

Paul Moran is an associate director at Kantar Millward Brown.

Sunday Independent

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