Irish consumers are more upbeat than ever before, with the level of confidence even surpassing measures taken at the very height of the boom, according to new research.
The green shoots of recovery have blossomed at last, at least according to the latest Consumer Market Monitor published jointly by the UCD Michael Smurfit Graduate Business School and the Marketing Institute of Ireland.
The survey, a compendium of quarterly data from the Central Statistics Office (CSO), Central Bank, European Commission and other sources, relies on a model of consumer behaviour that sees economic variables such as income levels, taxes, interest rates and exchange rates influencing consumer confidence which in turn influences consumer behaviour.
It shows that consumer spending contributed to economic growth for the first time since the crash of 2008 and that the retail sales volume index is now back to where it was in 2005, with the volume of consumption projected to expand 1.6 per cent for 2015.
Growth path
The survey also shows that, for the first time since mid-2007, more consumers expect their household finances to improve rather than worsen in the year ahead.
"Overall, retail sales have turned a corner and are back on a growth path, although off a very low base," said Mary Lambkin, professor of marketing at the UCD Michael Smurfit School of Business.
Consumer spending accounts for more then 60 per cent of GNP in Ireland, and Prof Lambkin described it as “a critical factor in driving recovery in the economy”.
She said consumer spending was affected by the combined influences of how much money people have available to spend coupled with their confidence in spending it.
“Disposable incomes are at last beginning to show modest growth as a result of jobs growth and this, coupled with greater availability of credit, is leading to accelerated spending on many categories of goods and services.”
Sales of new cars experienced a significant turnaround last year with a 30 per cent increase in sales recorded. This buoyancy appears to be continuing with 30,000 new cars sold in January 2015, up 31 per cent on the same month last year.
Household disposable income rose by 3 per cent in 2014 on the back of growing employment, the first increase since 2008.
Disposable incomes rose by an estimated 1 per cent in 2014 and are expected to rise further this year in response to rising employment figures and falling oil prices.
Reflecting the increasing consumption, VAT receipts were up 7.9 per cent for 2014 while sales of services were up 3.8 per cent. When cars are excluded, retail sales rose 3.7 per cent.
