Concern About Declining Consumer Confidence
Time to Take Note of Declining Consumer Confidence
The Irish economy is growing at the fastest rate in Europe, with projected growth for 2019 ahead of most other EU states. The OECD has figures show growth of 5.9% this year, with a prediction of 4.1% growth in 2019. Full employment is practically upon us, with the unemployment rate this week falling to just 5.7% seasonally adjusted rate. In this environment surely consumers should be more confident than ever?
It is easy in such times of growth to ignore indicators that might not tell such a rosy story, as people don’t really like bad news. However, the reality is that consumer confidence has been in decline, from the highs recorded earlier in the year, for some time now. The RED C Consumer Mood tracking conducted three times a year, saw its first drop in June this year, after several years of growth. That drop was further compounded in October, as confidence in the Irish economy fell back again. This downward trend is also corroborated from other sources. The KBC ESRI confidence measure has mirrored the RED C findings, with three months of successive declines in August, September and October, which saw confidence levels fall to a 46 month low.
While clearly we can assume that the Brexit horizon of next March is helping to drive consumer concerns, this isn’t something that we can ignore; as it is also having an impact on their behaviour. We are talking to several commercial clients to make sure they are aware of this decline in confidence, and the possible impact on consumer spend now and in the future. Some have already experienced a clear tightening among consumers.
In today’s poll we asked a series of questions to try and understand consumer sentiment better. The impact of concerns about Brexit are clear, but they are also very real given consumers are telling us that they are already cutting back spending. The great majority (82%) of Irish consumers are concerned that Brexit will impact on the Irish economy negatively. That concern is greatest among those who are in employment, particularly those working part time 86%. The concern is also greatest outside of Dublin, in particular in border counties. To a lesser extent people are also concerned that Brexit will have an impact on job security, with 41% suggesting they are worried about future employment.
On top of Brexit, it is also clear that while the economy may be doing very well at a Macro level. The growth seen simply isn’t being felt to the same degree among consumers themselves. Rising rents, the cost of fuel and perhaps a lack of real pay increases for many, mean that a large proportion of consumers claim that they have less disposable income now than they did three months ago. In fact, more than 2 in 5 (41%) Irish consumers say they have less to spend now than they used to, and this is where the booming economy meets the reality of increased costs and little increase in take home pay. Those employed in more manual trades, are more likely to have seen a decline in disposable income; as well as those living in Munster, Connaught and Ulster regions – suggesting this isn’t all about sky high rents in Dublin.
The real issue for concerns about Brexit and squeezed disposable income for consumer facing businesses however, is when we look at the impact that this is having on how consumers are actually spending. Almost half (46%) of all consumers, now claim that they are being more cautious about their spending in preparation for a possible downturn in the economy generally. This is particularly seen among the “Grey” market where 59% suggest that they are being more cautious.
On the evidence of trends in consumer confidence, and the additional underlying feelings among consumers in this poll, the downward trends in confidence are no longer just of background interest. Instead they are now surely a “sit up and take notice” call for business and government.
From a political point of view as yet this doesn’t appear to have had a marked impact on vote intention. It is clear however, that a continuation of this trend could drive voters to look for economic stability or safety, or alternatively a change if things start to go wrong as Brexit unfolds.
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