Consumer Spending Peaks Since Bailout

consumer-spending1The willingness of the Irish consumer to spend money is at its highest level in three years, regardless of the fact that over 50% of people polled believe their disposable income will have lessened by next year.

A survey done by Behaviour and Attitudes revealed that 55% of people think their wages will decrease by next year, and that the Irish economy will continue to worsen; just 12% said they believe the economy will be better in 2014. Yet surprisingly, consumer confidence has risen, to its highest level since before the 2010 bailout. B&A director Luke Reaper said of the report, “this leads us to believe that Irish consumers, while still viewing the economy negatively, are beginning to weather the storm”.

The news is certainly a welcome surprise, as new figures from the Central Statistics Office show that the cost of living has increased. Food prices in particular have gone up, by 1.6% since last year. Meats seem to have taken the brunt of this increase, with lamb going up by over 5% on average, and the price of fish rising by roughly 4%. In a nation partial to a drop of drink, it’s no surprise to learn that alcohol prices have also increased, by over 5% across the country; although in contrast, wine prices have fallen by nearly 4%.

The worry now is that austerity measures – such as the impending property tax and water charge – will hit the average consumer’s disposable income quite hard, meaning that consumer spending will decrease again next year. According to Alan McQuaid of Merrion Stockbrokers, the new measures “will again hit disposable incomes, which will in turn weigh negatively on spending power”. And unfortunately, three years of cautious spending increases, followed by a sharp decline, are likely to have a negative effect on an economy that is just getting back on its feet.

We can conclude that the Irish consumer’s belief in the economy is certainly more confident than it has been in some time, but the fact that 55% of people firmly believe that they will have less money by next year shows that there is still a significant fear for financial security. Thus on paper, the consumer economy gives the false impression of being in recovery; in all likelihood, once austerity measures kick in it will probably fall again.

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