Cash is king as credit card spending falls 15%

SHOPPERS are relying less on plastic and switching to cash as credit card spending plunged 15% over the last year.

Consumers are also forking out a third less in stores, with spending per transaction falling 32% to €45.64 in the three months to the end of September.

The latest consumer market monitor from UCD Smurfit School and the Marketing Institute of Ireland also found that for the first time sales of second-hand cars exceeded that of new cars this year.

There were 2,272 new private cars licensed in September this year compared with 4,364 in the same month last year, a decrease of almost 48%.

Consumer expenditure is expected to fall 7.6% this year and a further 4% next year.

Shoppers are moving away from the “buy now, pay later” laissez faire attitude they once had, according to professor Mary Lambkin of the UCD Smurfit School.

“People don’t know what the future may bring and don’t want to risk mounting debt. It appears cash is once again king,” she said.

From 2003 to 2008 there was a 21.6% increase of 393,000 in the number of credit cards in circulation in Ireland. Growth continued into 2008 but at a slower rate of 8.2% and has reduced significantly in 2009.

According to the monitor, retail sales value, excluding the motor trade, fell by 10.4% in the year to August 2009. Volume sales declined less dramatically at 5.2% which shows that prices have dropped faster than unit sales.

Chief executive of the Marketing Institute of Ireland, Tom Trainor said: “This resource is a great tool to gauge consumer confidence in the ever changing Irish market. It’s encouraging to see a 3.6% growth in sales volume in the pharmaceuticals medical and cosmetics sector. This is really positive news for this sector, and the Irish economy in the midst of this economic slump and we will continue to update this report every quarter to highlight current trends.”

Consumer confidence reached its highest level in 12 months in June but it is still lower than Britain and Europe.

The pharmaceutical, medical and cosmetics sectors are the only ones showing growth (3.6%) over the last year. One of the hardest hit sectors in value terms has been household equipment sales — down by 17.5% in the year to August 2009.

Department stores have seen a decrease in both sales value and volume of 13.6% and 2.9% respectively in the period but there were some signs of improvement from June to July with sales value up 0.1% and volume by 7.7% month-on-month.