Latest consumer spending figures indicate a loosening of the purse strings
Confidence has already surpassed its 2007 peak and sentiment remains higher in Ireland than in either the UK or Europe
More people at work and rising incomes helped to boost consumer confidence and drive consumer spending higher in 2015, with a strong recovery evident in the final quarter. Consumer spending last year – at an estimated €90 billion – was close to its 2007 peak, according to a report by the Smurfit Graduate Business School.
But consumer confidence, however, has already surpassed its 2007 peak and sentiment remains higher in Ireland than in either the UK or Europe.
In 2015, a nine per cent increase in gross disposable income facilitated a three per cent rise in consumer spending, with a four per cent increase expected in 2016. Almost two million people are now employed in the domestic economy – up by 158,000 since the low point in 2012 – and perhaps the clearest indicator of the strength of the economic recovery.
As the Smurfit report points out, the strong pick-up in consumer purchases reflects a “pent up demand” following the years of stagnation after the collapse of the economy.
That rebound is most apparent in the buoyant sales of “big ticket” items: sales of new cars were up more than 30 per cent last year. Nevertheless, as the 2015 figure remains 25 per cent below the annual sales rate achieved in the boom years, this also indicates the scope for further growth.
The sharp rebound in spending has been accompanied by a reduction in household debt. And for a state among the hardest hit by the economic crisis, Ireland’s success in lowering household debt, while increasing consumer spending, represents a singular achievement.
That said, Ireland’s overall public debt – government, household and corporate – remains high by international standards and the remarkable progress made in reducing it reflects the strong rate of economic growth in recent years.
In that respect consumer spending, which accounts for more than 50 per cent of GNP in Ireland, remains – as one of the report’s authors Mary Lambkin points out – “a critical factor” in driving economic recovery.