Consumers stay south but slow to spend

CONSUMERS are no longer flocking to the North but many are stillreluctant to part with their cash.

The KBC/ESRI consumer sentiment index has also found that almost three out of four people expect unemployment to increase this year. This news comes as retail groups say hundreds of stores are on the brink of closure.

The KBC/ESRI index rose in January to 48.7 from 44.4 in December. This is well down from the 64.6 recorded in January 2010.

David Duffy of the ESRI, said consumer sentiment improved in January, mainly due to an improvement in the perception of current conditions.

The index of current economic conditions increased to 74.2 in January from 68.5 in December while the forward-looking index rose to 31.5 in January from 28.1 in December.

KBC economist, Austin Hughes said the rise in consumer sentiment in January is a “pleasant surprise”.

“A little over half of this is due to the usual improvement in the buying climate as post-Christmas sales attract the bargain hunters. However, this element of the survey jumped less than in previous years. So, it suggests consumers remain fairly cautious.

“With consumers slightly less negative about the economy and their spending power than in December there are a couple of modestly encouraging signs in these data,” he said.

Mr Hughes warned that it would be wrong to conclude that the January numbers hint at a turnaround in sentiment and spending.

“Irish consumer confidence has weakened considerably in recent months. So, the January figures say that consumers feel they have already discounted a lot of bad news.

“While these data suggest Irish consumer sentiment is not in freefall, there must be some risk that when post-Christmas bills and post-budget pay packets are examined, sentiment could decline further in the next couple of months,” he said.

Meanwhile, figures released by Experian found that footfall or traffic to retailers in Ireland fell by 1.3% last year compared with 2009.

In the final quarter footfall fell by 1.1% compared to the same period last year.

In the North average footfall fell throughout the year by 4.7% and by 7.2% in the final quarter of 2010.

Head of sales at Experian Mark Anderson said: “The tough conditions experienced by retailers in Ireland in recent years have continued throughout 2010.

“The usually buoyant Christmas shopping period did not materialise this year, as December recorded the most significant year on year decrease of 2.6%.

“The inclement weather conditions experienced recently undoubtedly had an impact on footfall.”

He said online-only retailers benefited from Christmas shoppers but said most high street brands in Ireland also have a presence on the web, which has the potential to dilute footfall.

On the North’s figures he said it is possible that those Southern shoppers who took advantage of the value there have now stopped travelling due to increased VAT and fuel prices.