PRODUCT PROFILE

Latest Dublin Prices

Consumers hurt but some green shoots

Tuesday, February 19 11:57:40

Retail sales weakened again in 2012, though there were some encouraging signs of improvement towards the end of the year as incomes rose and the jobs market stabilised with more "green shoots" apparent for this year.

That's according to UCD Michael Smurfit Graduate Business School's Consumer Market Monitor for Q4 2012 out today, which showed that sales were down by 2.1pc in Q1 and by 1.1pc in Q2 year-on-year but increased slightly in the third (0.6pc) and fourth quarters (1.5pc).

Overall consumer confidence, aggregate consumer spending, car sales, retail spending and other consumer services were all down. However, data also identifies a number of green shoot developments that may provide a platform for future growth, it found.

It also pointed to some encouraging indicators. Disposable incomes rose by 4pc in current terms (2.3pc in real terms) in the first three quarters of the year, presumably as a result of an uplift in the jobs market. Net worth of Irish households rose in 2012 for the first time since Q1 2008. Consumer debt has fallen rapidly. There was a drop of 33pc between May 2008(E127 billion) and December 2012 (E79 billion) in loans for house purchases. Other consumer lending peaked in Q1 2008 at E24 billion but had declined to E12 billion by December 2012, a drop of 50pc from the peak and of -5.5pc for the year.

Consumer borrowing has fallen by a whopping 26pc since 2006. Total household credit peaked in March 2008 at E150 billion, but has declined steadily since then, down to E111 billion by December 2012, a reduction of -26pc from the peak. Loans for house purchase account for over 70pc of lending to households. Total outstanding loans for house purchase peaked in May 2008 at E127 billion but reduced to E85 billion by December 2012, a drop of -33pc. Loans for house purchase continued to decline in 2012, down about 2pc for the year.

Mary Lambkin, Professor of Marketing, UCD Smurfit School, and one of the authors of the Monitor, said the only thing that seemed to go up was costs - utilities, health insurance, and property tax, to name but a few.

"And, of course, mortgage arrears have kept increasing to their current alarming level. Consumer confidence is likely to remain weak while unemployment remains high and rising costs are putting ever increasing pressure on already cash-strapped consumers. Consumers are exercising caution by paying down debt rather than spending. We currently have an exceptionally high savings ratio, 80pc of which is used for debt repayment, meaning little disposable income is available for any kind of non-critical spending. Despite this, there were a number of more positive developments that show some light at the end of the tunnel for Irish consumers."