Wednesday 18 January 2017

Unleashing power of consumers can drive recovery

But a raft of new taxes and a dearth of bank lending will destroy any green shoots

Published 02/02/2014 | 02:30

Furniture sales have helped push up retail sales
Furniture sales have helped push up retail sales

You have to look a little closely to spot them, but Tuesday's retail sales tell us three important things about the economy: that the Irish consumer is a giant with awesome power that, if unleashed, could drive a vibrant recovery, that population growth is what gives this giant its power and that too much taxation and too little credit are holding it back.

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In Britain and Germany, where banks are working and taxes are falling, consumer confidence is now back to pre-crisis levels. The same is true in Ireland. But here core retail sales are down 13.5 per cent on 2007 so while confidence is back to pre-crisis levels, spending is not. Spending is growing again and even picked up at the year end with a 3 per cent December rise beating the 0.7 per cent average for 2013. That pick-up should help recent forecasts of Ibec and the Central Bank – for growth of 2 per cent or more this year – to become a reality.

But consumers could be doing much more, just look, for example, at the rate of growth in furniture and lighting in December: up a staggering 21 per cent in just 12 months, this shows what a very modest upturn in housing market activity can achieve. Now imagine a sustained upturn. Three other increases over that period – the 5.4 per cent rise in clothing, footwear and textiles, the 6.2 per cent rise in electrical goods and the 7.6 per cent rise in motor sales – all have one thing in common: they are driven by population growth.

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