Dublin, November 16, 2015: New findings from the quarterly Consumer Market Monitor (CMM), published today by the UCD Michael Smurfit Graduate Business School and The Marketing Institute, show that consumer spending is making a significant contribution to Ireland’s economic growth.

Much of this recent spending reflects pent up demand reflected in rapidly growing sales of “big ticket” items – new cars, homes and home furnishings, electrical goods and other consumer durables.

The Consumer Economy

The high sales volume of new cars continued to grow in the first nine months of 2015 with 114,446 new cars licensed in the first three quarters of the year, an increase of 31%. Sales of 150,000 are now being predicted for next year, a level which has not been seen for a number of years in Ireland.
Property sales are also buoyant, with 21,876 residential properties sold in the first half of 2015, this was up 31% on the same period last year.

Retail sales are also improving significantly with sales volume up by 7.2% in Q3, year-on-year, and by 6.2% for the year to the end of September. Sales of household goods have been particularly remarkable, with furniture and lighting up by 18.7% in volume in Q3 year-on-year, electrical goods up 13%, and hardware, paints and glass up 4.5%. This reflects the increasing number of property transactions and demonstrates the interdependence of these sectors.

Sales of services have also been strengthening and they are up 6.8% for the first three quarters of 2015.

Consumer Incomes and Spending

There are now 1.96 million people at work in Ireland, up by 130,000 since the low point in 2012. This improved employment level is beginning to have a positive effect on the amount of disposable income available in the economy.

Looking ahead, consumer expenditure is expected to continue to grow due to sustained growth in employment and stronger consumer confidence. The Central Bank is predicting an increase of 3% in personal spending for 2015 as a whole, and a similar growth of 2.5% for 2016. Other forecasters are more optimistic, forecasting growth in consumer spending of over 3.5% in 2016 and onwards.

Consumer Borrowing

Household debt levels in Ireland remain relatively high at 167% of disposable income; this compares with a Eurozone average of just over 90%.

Borrowing by Irish consumers has declined steadily since its peak of €150 billion in March 2008. At the end of Q3 it now stands at €92 billion, down 39% from the peak. Total lending to Irish households continued to fall in 2015, decreasing by 2.8% for the year to the end of Q3 2015, as households work to get their borrowing down.

Loans for house purchases, which account for 82% of household loans, peaked in Q1 2008 at €124 billion. Since then, there has been a net decrease to €77 billion by September 2015, a cumulative decline of 38%. Household debt is reducing at a rate of about 2.8% per annum.

Retail Spending

Following four years of decline, retail sales stabilised in 2012 and this upward trend has continued into 2015, with sales volume up by 6.2% for the year to the end of September.

Online retailing has become an important feature in recent years, accounting for as much as 15% of business for many retailers. It was worth €5.6 billion in 2014, up 30% on the previous year, and is predicted to grow to €21 billion by 2017.

Recent Trends

All product categories in the Consumer Market Monitor experienced growth in Q3 2015, with furniture and lighting up the most at 18.7% in volume, followed by electrical goods at 13%, year-on-year. More remarkable, however, is the significant growth displayed by sectors that have been particularly weak throughout the recession, such as bars and newsagents. In summary:

• Food sales up 5.1% in volume and up 3.4% in value
• Non-specialised stores (supermarkets) up 5.3% in volume and 3.5% in value
• Fuel up 2.5% in volume but down 6.3% in value
• Clothing, footwear & textiles up 12.6% in volume and 8.6% in value
• Household equipment up 18.7% in volume and 12.6% in value
  Department stores up 7.9% in volume and 4.2% in value
• Pharmaceuticals and cosmetics up 6.7% in volume and 3.2% in value
• Bar sales up 7.1% in volume and up 7.4% in value
• Books, newspapers, stationery up 0.6% in volume and 2.1% in value

Overall, retail sales are back on a strong growth path, accelerating in each quarter of this year. This positive momentum augurs well for continuing growth through the rest of 2015 and into future years, reflecting the broad-based strengthening of the economic fundamentals in the Irish consumer market.

Mary Lambkin, Professor of Marketing, UCD Smurfit School, and one of the authors of the Monitor, said: “Consumer spending accounts for over 50% of GNP in Ireland and is a critical factor in driving recovery in the economy. Disposable incomes are at last beginning to show modest growth as a result of jobs growth and this, coupled with greater availability of credit, is leading to accelerated spending on many categories of goods and services. Overall, retail sales have turned a corner and are back on a growth path, and the pace of growth is steadily accelerating.”

Tom Trainor, Chief Executive, The Marketing Institute, said: “Data from the Q3 2015 Consumer Market Monitor indicates that the consumer economy in Ireland is now in the midst of a broad-based recovery. Consumer confidence plays an important part in this recovery as people will only spend money when they feel optimistic about the future and their own financial security. This particularly applies to the big ticket spending.”

The Consumer Market Monitor

The consumer market accounts for 54% of GNP and 46% of GDP, and therefore its state of health fundamentally affects the state of the national economy.

What does the consumer market cover? In summary, it includes consumer spending under three main headings: goods, services and housing. Goods account for about 40% and include everything sold through retailers; services of all kinds account for another 40%; and housing makes up the balance of 20%.

To download the full report, click here