Consumer spending growth falls to three-year low

Consumer spending recovered somewhat in June, but the second quarter was still the weakest for almost three years, according to Visa’s Irish Consumer Spending Index.

The index, which measures expenditure across all payment types, including cash, cheques and electronic payments, shows there was modest 1.6 per cent growth in consumer spending year-on-year in June.

While this was the quickest rate of expansion in the past three months, the quarter overall was the weakest for almost three years since the index began.

Spending increased by 1 per cent during the quarter on an annual basis, with growth now having slowed in four successive quarters.

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In terms of ecommerce, which was the principal driver of the overall expansion in consumer spending, there was a 7.2 per cent year-on-year increase. This was little-changed from that recorded in May.

On the other hand, face-to-face expenditure decreased 1.2 per cent year-on-year. This was the ninth month in a row it suffered a reduction. This was despite the pace of decline easing from the previous month.

All but one of the eight monitored sectors registered spending growth in June, the exception being transport and communication where expenditure decreased 3 per cent for the third month running. Moreover, the reduction was the most marked in the series to date.

Household goods

The strongest expansions were in the household goods, which increased 8.2 per cent year-on-year, and hotels and restaurants, which increased 6.8 per cent year-on-year. Growth of spending also accelerated in the food and drink (3.4 per cent); clothing and footwear (1.7 per cent); and recreation and culture (1.4 per cent) sectors.

Clothing and footwear put in its joint-best performance since July last year, recording a third consecutive month of expansion, which was described as “extremely positive” as the sector had been challenged in previous quarters.

Visa country manager for Ireland Philip Konopik said growth in Irish consumer spending had gradually levelled out since spiking in February 2016.

“The last quarter represented the weakest degree of expansion since we began the index,” he said. “There was an uptick in June and it will be interesting to see if this leads to further expansion over the summer or whether consumer confidence becomes more cautious given the potential for future shocks.

“There are still lots of positives to be drawn from the data, with the majority of sectors seeing increases in expenditure and it is fantastic to see a positive trend emerge for clothing and footwear with year-on-year rises in each of the last three months.”