Confidence and availability of credit sees recovery in consumer spending

Increasing consumer confidence and a greater availability of credit are contributing to the tentative recovery of consumer spending, according to figures released yesterday.

The Consumer Market Monitor, compiled by the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School, shows that consumer confidence is on the rise and has increased significantly over the past year.

The positive changes in consumer sentiment and subsequent spending increases were seen most clearly in a boost to car and retail sales.

Professor Mary Lambkin, of UCD’s Smurfit School, said that while disposable income remains constrained for many people, the surge in consumer confidence contributed to improved spending levels.

“Consumer spending accounts for over 60% of GNP in Ireland and is a critical factor in driving any recovery of the economy. Consumer spending is affected by the combined influences of how much money people have available to spend, coupled with their confidence in spending it.

“Disposable incomes are still under pressure but increasing confidence coupled with greater availability of credit is at last leading to significant growth in many categories of goods and services,” she said.

Motor sales benefited from consumers’ greater ability and willingness to spend, with 62,280 new cars being sold in the opening six months of the year, a 26% increase on the same period last year.

The property sector also received a boost as house sales rose by 28% in the first quarter of the year.

Renewed consumer confidence and further access to credit also resulted in an increase of 4%, year-on-year, in retail sales in the second quarter.

Essentials like food and fuel as well as clothing and household equipment experienced strong growth, while pharmaceuticals and bar sales decreased.