Slowdown in Christmas consumer spending raises concerns

Growth in household spending slowed in December for the third month in a row even as online shopping surged amid the Christmas spending splurge, raising concerns about the outlook for consumer spending in 2017, according to a Visa survey.

Overall household spending increased 3.6% in the month from December 2015, but growth was down from the 3.9% annual rate posted in November and was growing at its slowest pace since the payments firm started its current survey over two years ago, the Visa Irish Consumer Spending Index found.

The index, which tracks spending in cash and cheques, as well as by electronic means, was the first survey to show spending during the key Christmas month, and was “concerning” for Irish shops, said David Fitzsimons at industry group Retail Excellence Ireland.

Visa said the plunge in the value of sterling against the euro since the Brexit vote had helped drive spending onto UK online shopping sites, with eCommerce climbing 15.4% in December from a year earlier, although down slightly from “the record” annual growth rate posted in November.

In store and “face-to-face” purchases, meanwhile, contracted slightly, by an annual 0.3%. Overall, the rate of growth in household spending in recent months has been below 5% “and it will be interesting to observe whether this trend continues”, Visa said.

A separate survey, the KBC Ireland consumer confidence measure, had a similar message with its monthly consumer confidence which it compiles with the Economic and Social Research Institute reporting that “increased uncertainty rather than notably weaker conditions” had hit confidence in December.

Despite showing that consumer confidence had fallen to its lowest since February 2015, the KBC survey was “still consistent with solid growth in 2017”.

KBC Ireland chief economist Austin Hughes said the survey covered a period of much media scrutiny on the potential threats facing the Irish economy, including the election of Donald Trump, as well as the risks of the Brexit fallout.

“It should be noted that at current levels, the consumer sentiment index is still consistent with a continuing increase in consumer spending but the flagging momentum of the sentiment index testifies to the marked absence of a widely felt ‘feel good factor’,” Mr Hughes said.

Its index slowed to 96.2 in December from 97.8 in the previous month and was down from a reading 103.9 in December 2015.