Irish consumer spending forecast to hit €111bn in 2020 as the consumer economy finally recovers from the ‘lost decade’.
Despite a faltering in confidence due to widespread worries about a negative fallout from Brexit, the Irish consumer economy has remained strong over the past three years, according to the latest Consumer Market Monitor (CMM).
The report, which was published by the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School, paints a very positive picture in which most measures of wealth and well-being are back to where they were at the last peak in 2007.
“More people at work, rising wages and the increasing value of homes are all contributing to the improvement of household finances, with the perception of increasing wealth leading to more spending,” said Tom Trainor, chief executive of the Marketing Institute of Ireland.
The Irish economy has seen steady growth over the last number of years, with consumer spending providing the main stimulus together with property investment. Household spending grew by 3.4 per cent (pc) in 2018 and by 3.3pc in 2019, to a total of €108 billion, a strong performance that exceeded expectations.
Driven by continuing growth in employment and incomes, consumer demand is expected to remain strong for the foreseeable future.
There are currently 2.33 million people employed in Ireland, up 54,000 (2.4pc) year-on-year, and up by 500,000 (28pc) from the low point in 2012. Employment is expected to continue growing this year but at a moderating rate as the economy approaches full employment.
The rise in earnings has also played a part in recent years as wages increased by 2.5pc per annum from 2015 to 2017, by 3.5pc in 2018 and 2019, and are forecast to rise 4pc this year and next, as the labour market tightens.
The combination of more people at work and higher wages has led to substantial increases in the amount of disposable income circulating in the economy. Aggregate disposable income increased by 5pc a year from 2015 to 2017 and by 6pc in 2018 and 2019, amounting to €117 billion for the year.
Consumer confidence on the rise
Following the economic crash, consumer confidence began to recover in 2013 and increased steadily for five years. By 2017, confidence among Irish consumers was well ahead of the previous peak in 2007 and was also significantly higher than that of our European neighbours.
However, confidence dropped in 2018, with consumers worrying about the negative implications of a hard Brexit. This downward trend continued through 2019 and, by the end of the year, confidence here was only marginally higher than the UK and the wider EU. Confidence picked up in January 2020, and the picture looks more promising for the rest of this year.
Consumer confidence in the UK has been consistently negative since Q2 2016, reaching lowest levels in November 2019. It has picked up over the last couple of months, suggesting that the tide may be turning now that Brexit has finally happened.
By Stephen Larkin
Published: 19 February, 2020