Consumer spending to remain weak

CONSUMER spending is expected to remain weak until 2015 as people continue to stash their money away.

This is according to the latest Consumer Market Monitor report which pointed out that the level of personal saving in Ireland increased dramatically over the past three years, from a low of 3% of disposable income in 2007 to a high of 12% in 2010.

The Central Bank recently predicted that consumer spending will be down by just 0.6% next year and will return to growth of 1% the year after.

However, the latest consumer monitor pours cold water on this, pointing out that consumers are still likely to continue saving for the next few years resulting in consumer spending remaining weak until 2014 to 2015.

The monitor predicts that consumer spending will fall 2.4% this year.

The report said that the increase in precautionary savings has been driven by increased uncertainty in the jobs market and the decline in real incomes brought about through a combination of increased taxes and pay cuts.

“It is expected that personal savings will stay above 10% until 2013, reducing to around 8% thereafter. This will still be high compared to other countries,” the report said.

It also pointed out that clothing and footwear purchases are “price and income elastic” which means that they tend to fluctuate along with the health of the economy.

“Sales of clothing and footwear grew strongly during the boom years and then dropped back just as quickly when economic conditions deteriorated,” it said.

Sales declined dramatically in 2009, down by -5.6% in volume and by -16.2% in value.

“The larger reduction in sales value reflects the effect of price promotions introduced to try to stimulate sales,” it said.

Sales of clothing and footwear rallied in 2010, up 3.5% in volume although down 5.4% in value.

The bar trade also has been in decline for the past decade as a result of a combination of factors, including the introduction of the smoking ban and random breath testing, and changing consumer lifestyles.

The report shows the volume of bar sales decreased by 25.9% from 2000 to 2010. This declining pattern continued into 2009 with sales volume down 10.1% and down by 9.9% in 2010.

“This unusually large decline was partly blamed on cross-border shopping,” it said.

A similar trend was experienced in Britain, with sales down by 4.8% in 2009 and by 4.2% in 2010.

Food sales have held up relatively well, according to the report.

Also there was a steady rise in the number of credit cards in circulation in Ireland from 2003 to 2008, peaking at 2.2 million, an increase of 393,000 over five years — a rise of 22%.

However the number of personal credit cards in circulation in May 2011 was 2.03 million which represents a decline of 190,000 from the peak.