Ibec forecasts a stabilising of consumer spending power

Consumer spending power is set to stabilise this year and increase in 2014, according to business group IBEC.

It also said the deal on the promissory notes was better than expected and should provide upward momentum to consumer confidence.

IBEC’s Irish Consumer Monitor, launched today, says spending power for Irish households would be almost unchanged this year at +0.2%, with spending power likely to increase to 0.7% next year.

Mortgaged households would see the greatest gain at 1.4% this year and almost 2% next year because of low interest rates.

While average price levels remain 2.5% below what they were in the summer of 2008, social welfare will remain fixed at best with price increases continuing to reduce spending power.

IBEC believes a return to a savings level of between 5% and 6% would deliver a boost to the domestic economy.

The ratio of personal savings to disposal income has fluct-uated in recent years, peaking at 10% in 2009, dipping to 5% in 2011 and rising again to over 8% last year.

IBEC senior economist Reetta Suonperä said consumer fundamentals had stabilised and the promissory note deal could provide real momentum to consumer confidence.

“The private sector began to add jobs during 2012; a tentative bottoming-out of house prices means that household net wealth is no longer falling and debt levels are starting to ease, albeit from high levels,” she said.

“In the absence of further bad news, consumer sentiment should recover during 2013.”

Meanwhile, figures show that rents are increasing again. Rents nationally rose by 2.2% in 2012, compared to a fall of 0.3% in 2011 and a fall of 2.5% in 2010.

According to a new report by Daft.ie, rents in Dublin are about 6% higher now than they were two years ago.

At the start of February, there were just over 2,100 properties available to rent in the capital, compared to the middle of 2009 when there were almost four times that amount.

Daft’s economist, Ronan Lyons, said young people starting out in their careers were looking to Dublin, Cork, Galway, and other cities as places to work.

The situation meant the country’s smaller rental markets were struggling.

In Connacht and Ulster there were five times as many properties available to rent now as there were five years ago

Mr Lyons said: “With landlords fighting for the attention of prospective tenants, it is not surprising that rents in Connacht-Ulster fell 2.2% in 2012, in line with the fall of 2% in 2011.

“The evidence from the rental market is that Dublin in particular is facing, if anything, a shortage of places to live, not a glut.

“If Nama is sitting on stock in Dublin, that stock is needed on the market sooner rather than later.”