Confidence rises as consumers start to spend again

CONSUMER confidence in Ireland is back in line with the European average as house sales increase threefold and shoppers start spending again.

The rate of consumer confidence doubled in March compared with a year earlier, according to the UCD Smurfit School and the Marketing Institute of Ireland market monitor.

It showed that in January, 658 second-hand residential properties were at “sale agreed” stage compared with just over 200 in the same month last year.

Although consumer spending is expected to decrease at a slower rate of 2.6% this year, analysts said this indicates a positive upturn when compared to the 10.3% overall drop last year.

Car sales have been a major factor in the increase in consumer sales following the introduction of the car scrappage scheme. Car sales in March were up 77% on the same month last year.

Professor of marketing at UCD Mary Lambkin said: “Consumers appear more willing to part with their disposable income as price reductions on houses and cars continue.

“We are taking full advantage of price cuts, seeking out value for money and opting to save more for a rainy day, with the personal savings rate projected to stay above the 10% level.”

The level of personal saving over the past three years has increased from a low of 3% of disposable income in 2007, to a high of 11% in 2009. The monitor said that given the uncertainty in the jobs market, the personal savings rate is expected to stay above the 10% level until 2013.

Meanwhile, according to Retail Excellence Ireland (REI), although the retail industry has reported falling sales for 25 consecutive months, the slowing rate of decline suggests that like-for-like growth is imminent.

Sales were down 8% for the period January to March 2010 compared with the same period a year earlier.

REI chief executive, David Fitzsimons said, however, that the decline has eased considerably and many operators are suggesting the industry has reached the bottom.

“Notwithstanding the fact that this modified growth is set against very weak sales figures in quarter one 2009, the results should be interpreted as positive news for the industry,” he said.

The improvement in quarter one retail figures is being attributed to growth in jewellery, ladies’ fashion and footwear, with most other sectors experiencing modified decline.

The grocery sector reported a poor performance, most likely due to the price war. The giftware and homeware sectors also continued to be weak.

Mr Fitzsimons said of concern also is that rent costs, as a percentage of sales, increased compared with this time last year.

“This is an incredible finding given that sales decline has actually eased and proves that landlords have not in fact been forthcoming with rent reductions despite claims to the contrary,” he said.