Reasons to be cheerful as consumer confidence and sales rise
Consumer confidence has reached a seven-year high as trends show people are starting to spend again.
Sales rose across the board throughout the first three months of this year, while household debt fell, according to the Consumer Market Monitor.
And positive gains in how people feel made at the end of last year continued to grow into the start of 2014, with confidence said to be up to 10 points from a baseline of zero.
It hit a low of more than minus 30 in mid-2008, the report by UCD Michael Smurfit Graduate Business School and the Marketing Institute of Ireland found. "Looking to the future there appears to be a slight cause for optimism," said Tom Trainor, chief executive of the Marketing Institute.
"Disposable income is still a major concern, however, and this of course reflects on when and what they can spend on and this has a knock-on effect on job creation and job preservation.
"Combined with other data, such as recent manufacturing and services PMIs, which have all shown positive growth, we hope that this positive growth and momentum will be sustained over the remainder of this year at least."
The monitor examines data from the Central Statistics Office (CSO), the Central Bank and the European Commission among others.
Researchers say positive news on employment and a recovering property market is nurturing consumer confidence, leading to increased spending.
With consumer spending accounting for 63pc of GNP in Ireland, it is seen as a critical factor in driving any recovery of the economy – but it is also affected by how much money people have to spend.
Data shows Irish households remain among the most indebted in Europe, averaging at 196pc of gross disposable income compared with 137pc in the UK and 123pc in the US.
But outstanding debt on personal credit cards has fallen steadily since it peaked at €3bn in December 2008 and stood at €2.24bn in March. The number of credit cards in circulation has also dropped 16pc to 1.8 million.
But the figures also show signs of recovery.
Sales of new cars, a leading indicator in the consumer economy, experienced a major turnaround with 39,366 units sold in the first quarter, up 27pc on last year. Second-hand cars also recorded a 27pc rise with 13,371 sold. A separate report published yesterday predicted car sales would pass the 100,000 mark next year.
Retail sales increased by 2.8pc in volume – Q1 year on year – while value increased by just 0.5pc, suggesting that weak demand is continuing to exert pressure on prices.
Clothing and footwear also experienced a 3.2pc rise in sales, while the property transactions soared by more than a third last year to 28,500.
"Disposable income has declined steadily due to a combination of rising unemployment, reductions in pay, and increases in taxes and other essential costs," said Mary Lambkin, professor of marketing, UCD Smurfit School.
"These events damaged not only spending power but the confidence to spend, with the result that consumer spending on all categories of goods and services has fallen significantly. Instead, consumers have taken a cautious approach."