Consumer Marketing Monitor Quarter 2 2013

UCD Michael SmurfitGraduate Business School

Consumer Market Monitor Q1 20

13

Table of Contents Executive Summary

1

Consumer Confidence

4

Consumer Incomes & Spending

6

Personal Spending on Goods & Services

7

Personal Savings

9

Personal Borrowing

10

Number of Mortgages Issued

11

Ownership Status of Borrowers

13

Number of Credit Cards in Circulation

14

Credit Card Debt

15

Retail Sales Index

17

Sales of Private Cars

19

Retail Sales‐ Department Stores

21

Retail Sales‐Food

23

Retail Sales‐ Pharmaceutical, Medical & Cosmetics

25

Retail Sales‐ Books, Newspapers & Stationary

27

Retail Sales‐ Bars

29

Retail Sales‐ House Equipment

31

Retail Sales‐ Clothing, Footwear & Textiles

33

CONSUMER MARKET MONITOR The Consumer Market Monitor is a publication provided by the Marketing Institute of Ireland in collaboration with the UCD Michael Smurfit Graduate Business School. It is designed to track key indicators of confidence and activity in the Irish consumer market as a resource for marketers and the wider business community. The consumer market accounts for 63% of GNP so it is an important indicator of the health of the overall economy. It relies on a model of consumer behaviour which sees economic variables such as income levels, taxes, interest rates and exchange rates influencing consumer confidence which, in turn, influence consumer behaviour including spending, saving and borrowing.

It is based on data from the Central Statistics Office (CSO), the Central Bank, the European Commission, and other secondary sources. The added value rests in the fact that the information is brought together in a single location and presented in a way that is easy to use for market analysis and sales planning. The accompanying editorial also highlights important trends and linkages that point to emerging opportunities and threats. It is published on the MII website and the UCD Smurfit School website and is updated every quarter. This edition covers quarter two of 2013.

1

UCD Marketing Development Programme ©2013

EXECUTIVE SUMMARY Introduction

Consumer spending accounts for over 60% of GNP in Ireland and is therefore a critical factor in driving any recovery in the economy. Consumer spending is affected by the combined influences of how much money people have available to spend—their disposable income, coupled with their confidence in spending it. Conditions in Ireland over the past five years have seen the amount of discretionary income declining steadily due to a combination of rising unemployment, reductions in pay, and increases in taxes and other essential costs. Not surprisingly, this has seriously damaged confidence, and consumers have responded by taking a cautious approach, increasing their savings and paying down debt. This logical response has seen borrowing levels reducing steadily, helping to restore household finances, but has resulted in a marked reduction in spending, particularly of non-essential items such as cars, electrical goods, and fashion clothing. This has had a very serious effect on retailers and other providers of consumer products and services which have seen their sales revenue reduce by up to half over the last five years. The evidence suggests that this decline in spending may be bottoming out by now, with retail spending in the first half of 2013 just about the same as the same period last year (volume up by 0.4%). It is difficult to see, however, how there can be any significant growth in the near term, in the face of pay cuts, the introduction of property taxes, and cost increases in essential items. The pressure on incomes is evidenced by the fact that gross disposable income declined by -3.7% in Q1 of this year, and this was directly reflected in consumer spending which reduced by -3% over the same period, a greater rate of decline than expected. Some recovery is expected for the remainder of this year due to a gradual improvement in labour market conditions and a pickup in consumer confidence, but it is still expected that consumer spending will decline by -0.5% for 2013 as a whole. A slight improvement of 0.4% is forecast for 2014 based on a continuation of the positive trend in labour market conditions and a less significant fiscal adjustment. On the plus side, there is some evidence of greater activity in the property sector, with an increase in the number of transactions (up 13% on last year), and in the sale of building materials (up 6% on last year), both of which should boost activity in the consumer economy. There may also be a positive effect from enhanced tourism numbers which are expected this year.

Consumer Confidence Confidence picked up slightly in the first half of 2012, rising to -20 in June, but turned downwards in the latter part of the year. This reflects an annual trend whereby confidence falls each autumn in expectation of a harsh budget. Confidence dipped again in the final quarter of 2012, but did not fall as low as in previous years. Consumer confidence has improved significantly this year, up 5 points in the first half of 2013 compared to the same period of last year. This was despite a slight drop in the first quarter due to concern about the impact of new household taxes and pay cuts on household finances.

2


There has been a significant improvement in consumer confidence in May and June, reaching -11, giving reason for optimism about future spending. The fact that the annual budget will be published in October from now on should also help to ensure a stronger finish to the year than hitherto. Mirroring the Irish trend, consumer confidence in the UK and wider EU picked up slightly in recent months, ending at -13 and -17, respectively, as fears about the stability of the Eurozone receded. Consumer Incomes and Spending Following growth of 60% in household disposable income from 2002 to 2008, there was a steady decline in recent years, down by -16% from the peak to the end of 2011. This downward trend halted briefly in 2012, with disposable income actually up by 2.5%, from €84 billion to €86 billion, which seemed like the portent of better times. Unfortunately, this trend has reversed again in 2013, with disposable income down -3.7% in Q1 compared to the first quarter last year. It seems likely that the public sector pay cuts and property taxes which took effect recently will put further downward pressure on disposable income in the near term. Household spending mirrored the income trend, increasing by a record 48% between 2002 and 2008, but declining steadily since then. Consumer demand remained weak in 2012 as households continued their efforts to repair their finances,, resulting in four consecutive years of decline, which saw real consumption contract by a cumulative -7.5% in real terms. This weakness accelerated in Q1 of this year, when consumer spending declined by -3%, year-on-year, a greater rate of decline than expected. Some recovery is expected for the remainder of this year due to a gradual improvement in labour market conditions and a pickup in consumer confidence, but it is still forecast that consumer spending will decline by -0.5% for 2013 as a whole. A slight improvement of 0.4% is forecast for 2014, assuming a continuation of the positive trend in labour market conditions and a less significant fiscal adjustment. Consumer Borrowing Borrowing by Irish consumers grew at a record level from 2000 onwards and peaked in March 2008 at €150 billion, but has declined steadily since then. The amount of household credit was down to €111 billion by December 2012, a decrease of -3.9% for the year, and a reduction of -26% from the peak. Total household lending is continuing to fall in 2013, down -4.5% in the first half of the year. Loans for house purchase account for over 70% of lending to households. Total outstanding loans for house purchase peaked in May 2008 at €127 billion but reduced to €79 billion by December 2012, a drop of -33%. Loans for house purchase continued to decline in 2012, down about -2% for the year, but actually increased by 8% between November and December, in a rush to avail of mortgage interest relief before it ended. Lending for house purchase has continued to decline in 2013, down -2% for the first half of 2013, year-on-year. Other consumer lending peaked in Q1 2008 at €24 billion, but had declined to €12 billion by December 2012, a drop of -50% from the peak and of -5.5% for the year. This category is continuing to fall fastest of all, down -11% in the first half of 2013.

3


Despite the rapid reduction in credit, Irish households remain among the most indebted in Europe, with debt averaging 201% of gross disposable income. This compares with 157% in the UK and 123% in the US. Retail Spending Retail sales have been badly hit in the recession, declining -10% in volume from the peak in 2007 to the end of 2012, while value declined by -16%. For the year 2012 as a whole, however, retail sales stabilised, with volume decreasing by just -0.2%, and value increasing by 0.4%, compared to 2011. This year was a tale of two halves, however, with sales volume down by -2.1% in Q1 and -1.1% in Q2 year-on-year, but increasing slightly in the third (0.6%) and fourth quarters (1.5%). After the seasonal peak in Q4 2012, retail spending slowed in Q1 2013. Spending was virtually flat for the first quarter of 2013 year-on-year, and increased by just 0.4% in Q2, year-on-year, suggesting, at best, that the market has bottomed out and may finally be stabilising. While these conditions are still very challenging for many retailers, it is a positive sign that retail sales may be stabilizing after four years of decline, with growth prospects in some categories. Recent Trends Sales through the motor trade have also been difficult for several years and that trend is continuing. There were 76,256 new cars sold in 2012, a decrease of -12% from the 86,932 new cars sold in 2011. This weakness has continued into 2013, with 49,503 new cars sold for the first six months, down -16% from the 58,936 sold in 2012. However, record sales of 11,621 cars were achieved in July, with the commencement of the new registration system. Sales of second-hand cars have been strong so far in 2013, increasing 23%, from 19,224 to 23,693, in the first half. The volume of retail sales excluding the motor trade stabilised in 2012, down by just -0.2% for the year, compared to average declines of -3.0% in each of the four preceding years. Retail sales are actually up very slightly in 2013 -- by 0.4% for the first half year, with value sales just about steady. Essential products including food and other groceries, and fuel, held up well in the second quarter of 2013 and household equipment showed significant growth: • Food sales up 0.1% in volume and up 0.8% in value; • Non-specialised stores (supermarkets) up 0.4% in volume and 1.1% in value; • Fuel up 2.6% in volume but down -0.4% in value; • Department stores up 1.4% in volume and up 0.4% in value; • Household Equipment up 4.7% in volume and up 0.1% in value; All other retail categories experienced declines in Q2 year-on-year, although the rate of decline is less than in previous quarters: • Clothing, footwear & textiles down –0.9% in volume and -2.7% in value; • Books, stationery etc. down -4.3% in volume and -3.9% in value; • Bar sales down -2.6% in volume and -0.7% in value; • Pharmaceuticals and cosmetics down -4.4% in volume and -2.9% in value

4


CONSUMER CONFIDENCE – ANNUAL

Consumer confidence reached an all-time low in Ireland in 2008, following the financial crisis, and this was mirrored in the United Kingdom and the rest of the European Union. Confidence improved all over Europe throughout 2009 but Ireland continued to lag both the UK and the rest of Europe, by margins of 54% and 47% respectively. The average level of confidence for 2009 in Ireland was just 4% better than 2008. Consumer confidence recovered steadily through the first half of 2010 but this trend reversed in the second half of the year coinciding with the IMF bailout. This downward trend continued in 2011 with confidence falling by 21% compared to 2010, and remained low throughout 2012. Confidence levels in the UK reached an all-time low in 2011, down 62% from 2010, due to a combination of higher living costs and a weak jobs market. Consumer confidence in the rest of Europe also fell in 2011 (down -16%), although not as significantly as the UK. Economic sentiment in the euro area improved in 2012 among consumers and across all sectors except the retail trade. All countries measured in this index remain well below the average confidence level experienced in the growth years preceding 2007. For example, the UK is now averaging -20 compared to a long-term average of -5. The US index is currently averaging 65 compare to a long-term average of 97. Historically, US consumer confidence averaged 93 reaching an all-time high of 145 in January 2000 and a record low of 25 in February 2009.1

1 http://www.tradingeconomics.com/united-states/consumer-confidence

-‐30.00

-‐25.00

-‐20.00

-‐15.00

-‐10.00

-‐5.00

0.00

5.00

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2002 -‐ 2012 Europe United Kingdom Ireland

5


CONSUMER CONFIDENCE – MONTHLY

Confidence picked up slightly in the first half of 2012, rising to -20 in June, but turned downwards in the latter part of the year. This reflects an annual trend whereby confidence falls each autumn in expectation of a harsh budget. Confidence dipped again in the final quarter of 2012, but did not fall as low as in previous years. Consumer confidence has improved significantly this year, up 5 points in the first half of 2013 compared to the same period of last year. This was despite a slight drop in February, March and April due to concern about the impact of new household taxes and pay cuts on household finances. There has been a significant improvement in consumer confidence in May and June, reaching -11 in June. Mirroring the Irish trend, consumer confidence in the UK and wider EU picked up slightly in recent months, ending at -13 and -17, respectively, as fears about the stability of the Eurozone receded. Consumer confidence in the US also strengthened this year. The second quarter of 2013 averaged 75, but reached 81 in June, the highest level since 2008, suggesting that consumer confidence is on the mend.2 .

2http://www.reuters.com/article/2013/05/28/us-usa-economy-confidence-idUSBRE94R0J620130528

-‐40

-‐35

-‐30

-‐25

-‐20

-‐15

-‐10

-‐5

0

5

2007 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

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Dec

2008 Ja

n Feb

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Apr

May

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Nov

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Jan 2007 -‐ March 2013 Europe Ireland UK

6


CONSUMER INCOMES AND SPENDING

Disposable income in Ireland increased from €65bn in 2002 to €104bn in 2008– an increase of 60%in real terms3. This was due to the combined effects of more people in employment and rising income levels. This trend reversed in 2009, however, when disposable incomes declined by -7.6%, to €96bn. Incomes declined by a further -4.2% in 2010, and by -2.4% in 2011 to €87 billion, a net decline of -16% from the peak. This period corresponded with a reduction in employment almost equal to the earlier increase -- from 2.13 million in 2008 to 1.82 in 2011-- a net reduction of 310,000. Household spending mirrored the income trend, increasing by a record 48% between 2002 and 2008-–from €62bn to €92bn. Spending has since declined in line with incomes, dropping -10.9% in 2009, and continuing downward in 2010 (-3.0%) and 2011 (-1.0%), to a level of €78 billion. Consumer demand remained weak in 2012 as households continued their efforts to repair their finances, resulting in five consecutive years of decline, which saw net consumption contract by a cumulative -7.5% in real terms. One positive sign was that gross disposable income was up 2.5% in 2012, from €84 billion to €86 billion which seemed to indicate a more positive picture. Unfortunately, this trend has reversed in 2013, with disposable income own -3.7% in Q1 compared to the first quarter last year4. It seems likely that the public sector pay cuts and property taxes which took effect recently will put further downward pressure on disposable income in the near term. The best that can be expected is that household spending will stabilise this year, with a modest increase beginning from 2014 onwards5.

3CSO Institutional Sector Accounts

4 CSO Institutional Sector Accounts, Q1, 2013. 5 ESRI and Central Bank

0

20,000

40,000

60,000

80,000

100,000

120,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Disposable Incomes and Household Spending €Billions -‐ Current

Disposable Incomes Household Spending

7


PERSONAL SPENDING ON GOODS & SERVICES – ANNUAL

There was a steady rise in personal spending in Ireland from 2000 to 2007, with a record increase of 8.6% in that year. Spending growth slowed in 2008, and declined steadily over the next four years; there was a record decline of-7.2% in 2009. In sum, personal consumption fell by a cumulative -7.5% in real terms over the five years from the peak in 2007 to the end of 2012.6 This downward trend continued in 2012, but at a slower pace, real consumption declining by -0.3%. The pattern of consumer demand during 2012 was one of significant weakness in the early months of the year, followed by recovery by mid-year, but with renewed weakness in the final quarter. A recent household budget survey provided evidence of the financial strain that has inhibited consumer spending7. Overall, 82% of households claimed to have reduced their spending on at least one category of expenditure as a result of the economic downturn. Nearly a quarter of all households indicated that they had cut back on five or more categories of spending. Over 40% of households indicated that they had experienced difficulties in keeping up with their bills and debts.

6Central Bank of Ireland, Quarterly Economic Bulletin, Quarter 1, 2013. 7 CSO Quarterly National Household Survey, Q1 2013

62,114

67,203 70,899

76,927

83,979

91,948 93,863

84,173 82,591 81,101 80,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Millions of Euro

2002 -‐ 2012 Current Personal Spending of Goods and Services

8


PERSONAL SPENDING ON GOODS & SERVICES – QUARTERLY

Personal spending peaks each year in the fourth quarter, in the run up to Christmas. This peak reached an all-time high in the final quarter of 2007 but has been on a steady downward trend since then. The volume of personal consumption in Ireland declined in real terms by -7.5% from the peak in 2007 to the end of 2012. There was a slight easing in the rate of decline in 2012 with consumption down by just -0.3% for the year. The pattern of consumer demand during 2012 was one of weakness in the early months of the year, followed by recovery in mid-year, but with renewed weakness in the final quarter as the budget loomed. This weakness accelerated in Q1 of this year, when consumer spending declined by -3%, a greater rate of decline than expected. Some recovery is expected for the remainder of this year due to a gradual improvement in labour market conditions and a pickup in consumer confidence, but it is still expected that consumer spending will decline by -0.5% for 2013 as a whole. A slight improvement of 0.4% is forecast for 2014 based on a continuation of the positive trend in labour market conditions and a less significant fiscal adjustment8 Consumer spending in the UK is also weak; it fell -6% in the 2008 and 2009 recession and has been broadly flat since the end of 20099. Consumers spent more on utilities in Q1 2013 as a result of increased energy prices, while spending in discretionary categories continued to ease compared to Q1 201210. US consumer spending increased by 1.8% in Q2, 2013, after a 2.3% gain in Q1.11. That’s just below the 2.2% average over the past three years suggesting that the U.S. economy remains on a steady growth path.

8http://www.centralbank.ie/publications/Documents/Quarterly%20Bulletin%20Q2.pdf 9 Bank of England Quarterly Economic Bulletin, Q1 2013. 10http://www.mondaq.com/x/235774/Economic+Analysis/The+Deloitte+Consumer+Tracker+Q1+2013 11 http://www.marketwatch.com/story/consumer-spending-slowdown-could-kill-2013-rally-2013-06-17

15,000

17,000

19,000

21,000

23,000

25,000

27,000

Q1 2007

Q3 Q1 2008

Q3 Q1 2009

Q3 Q1 2010

Q3 Q1 2011

Q3 Q1 2012

Q3 Q1 2013

Millions of Euro

2007 -‐ 2013 Current Personal Spending on Goods and Services

9


PERSONAL SAVINGS – ANNUAL

The level of net personal saving in Ireland increased dramatically over the past five years, from a low of -1% of disposable income in 2006 to a high of 11% in 201212. The average for the past decade has been 3.5%. The savings ratio continued to rise in 2012, estimated to be as high as 11% for the year as a whole, and has increased by a further 1% in Q1 2013. The longer-term net savings ratio consistent with economic recovery for Ireland should be in the range of 5-7%. The savings ratio is not expected to reduce much in the next few years as consumers prioritise repaying personal loans and mortgage debt over current spending. In fact, over 80% of this saving represents repayment of loans13. Despite the increase in savings, the net worth of Irish households (the difference between total assets and liabilities) fell by -37% from its peak value at Q2 2007 to the end of 201114. Significantly, Q2 2012 saw the first rise in the net worth of Irish households since Q1 2008. At the end of December 2012, the net worth of Irish households stood at €462 billion, or €100,674 per capita15. The UK savings ratio declined from the mid-1990s until 2007 when it reached 1.4%. It rose again following the financial crisis and reached a peak of 8.6% in Q2 2009 but has since fallen back to a more normal level of 7% in 201216. The US Personal Saving Rate is currently at 3.9%, which compares to the long- term average of 6.9%17.

12 CSO Quarterly Institutional Sector Accounts. 13 Central Bank of Ireland 14Central Bank Quarterly Economic Bulletin, Quarter 3, 2012. 15 Central bank Quarterly Financial Accounts 16 Office of National Statistics 17 US Department of Commerce

0% -‐1%

1% 2%

-‐1% 0%

6%

10% 9% 9.5%

11%

-‐2%

0%

2%

4%

6%

8%

10%

12%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2002 -‐ 2012 Current Net Personal Savings as a % Disposable Income

10


PERSONAL BORROWING – QUARTERLY

Borrowing by Irish consumers grew at a record level from 2000 onwards. Total household credit peaked in March 2008 at €150 billion, but declined steadily since then, down to €111 billion by December 2012, down -3.9% for the year, and a reduction of -26% from the peak18.Total household lending is continuing to fall in 2013, down -4.5% in the first half. Loans for house purchase account for over 70% of lending to households. Total outstanding loans for house purchase peaked in May 2008 at €127 billion but reduced to €79 billion by December 2012, a drop of -33%. Loans for house purchase continued to decline in 2012, down about -2% for the year, but actually increased by 8% between November and December, in a rush to avail of mortgage interest relief before it ended. Lending for house purchase has continued to decline in 2013, down -2% for the first half of 2013, year-on-year. Other consumer lending peaked in Q1 2008 at €24 billion but had declined to €12 billion by December 2012, a drop of -50% from the peak and of -5.5% for the year. This category is continuing to fall fastest of all, down -11% in the first half of 2013. Despite the rapid reduction in credit, Irish households remain among the most indebted in Europe, with debt averaging 201% of gross disposable income. This compares with 157% in the UK and 123% in the US.19

18Central Bank of Ireland, Money and Banking Statistics. 19OECD Factbook

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Q1 '07

Q2 Q3 Q4 Q1 '08

Q2 Q3 Q4 Q1 '09

Q2 Q3 Q4 Q1 '10

Q2 Q3 Q4 Q1 '11

Q2 Q3 Q4 Q1 '12

Q2 Q3 Q4 Q1 '13

Q2

Billions of Euro

Total Credit House Mortgage Finance Other Personal Loans

11


NUMBER OF MORTGAGES ISSUED – ANNUAL

The number of new loans paid out for house purchases is a good indicator of the number of homes being bought and sold in the market. This number peaked in 2005 with a total of almost 85,000 new loans issued, but has fallen dramatically since then, from 40,390 in 2008to 9,700 in 2011, a net reduction of 76%.

This trend reversed slightly in 2012, with a 19% rise in the number of new mortgages issued, for a total of 11,548, suggesting the beginning of a recovery in the housing market. This trend reflected the number of new house completions, which reached almost 137,000 in 2006, the peak year of the Irish property bubble. In contrast, there were 26,820 house completions in 2009, 21,772 in 2010, 15,800 in 2011, and 7,500 in 2012. Total stock of properties on the market is now 41,000, the lowest total since autumn 200720. This is down from approximately 60,000 in 2008-2011, and from 53,000 in mid-2012The total number of transactions registered in 2012 was 21,000, compared to 17,621 in 2011 and 19,000 in 201021. The stock available for sale in Dublin has fallen -35% from its peak in late 2008 to a current low of 3,170. The proportion of properties selling within four months has risen since the start of the year to 63% suggesting some normalisation in the market.

20 Daft.ie Property Report Q2, 2013 21 MyHOme.ie Property Barometer Q2, 2013

84,639

70,179 63,333

40,390

22,079 17,152

9,700 11,548

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

2005 2006 2007 2008 2009 2010 2011 2012

2005 -‐ 2012 Current Number of Mortgages Issued

12


NUMBER OF MORTGAGES ISSUED – QUARTERLY

Mortgage lending increased by 110% in Q4 2012 compared to Q4 2011 due to the desire to obtain mortgage interest relief before it ceased on the 31st December 2012. The first quarter of 2013 saw a corresponding decrease, with just 1,698 new mortgages issued, down -69% from the 5,402 in the previous quarter, and down -18.5% on the 2,084 in Q1 2012.22 There were over 4,600 home purchase transactions in the first three months of 2013, compared to 4,100 in the same period a year earlier, an increase of 13%23. This suggests that more than half of all purchases were for cash. The proportion of properties finding a buyer within four months has risen from 34% a year ago to 45% now. The outlook looks positive for the rest of the year with several banks having announced increases in their mortgage funding, coupled with evidence of strong demand in the market, particularly in the Dublin area. The UK mortgage market increased by 18% in Q1 2013 year-on-year. The second quarter saw a further increase of 8%.24 House purchases in the US increased 8.5% in June 2013, to an annual level of about 5 million, a level that hasn’t been seen since 2008, indicating a strong recovery in that market25.

22http://www.irishtimes.com/business/sectors/financial-services/mortgage-lending-slumps-in-q1-1.1400198 23 Myhome.ie Property Barometer, Q2, 2013. 24www.parliament.uk/briefing-papers/sn02820.pdf 25 US Department of Commerce.

15,738 16,830 16,426

14,339

9,498

12,459 11,038

7,395

4,542 5,805 6,105 5,627

3,839 4,663 4,864

3,786

2,186 2,502 2,841 2,563 2,084

2,702 3,381

5,402

1,698

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2007 Q1

Q2

Q3

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Q2

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Q2

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2007 -‐ 2013 Total First Xme buyers Movers

13


OWNERSHIP STATUS OF BORROWERS

The most notable change in the composition of mortgage lending has been the reduction in buy-to-let lending, from 25% in 2008 to 5% in 201226. Other categories which experienced declines were mover purchasers, and the re-mortgage and top-up segments. The only sector which has shown some buoyancy is first-time-buyers. First-time buyers remain the single largest segment of the market accounting for almost 60% of the total in terms of number of transactions, and 55% in terms of monetary value. The mover market has held relatively steady in percentage terms from 2007 to 2012, but this conceals a dramatic reduction in the number of transactions, from 32,864 in 2007 to 6,533 in 2010 4,241 in 2011, and 4,750 in 2012.

26 IBF/PWC Mortgage Report Q3, 2012.

58% 37%

5%

2012

First Time Buyers Movers Buy-‐to-‐Let

56% 38%

6%

2011


58% 35%

7%

2010


51% 37%

12%

2009


14


NUMBER OF CREDIT CARDS IN CIRCULATION – ANNUAL

There was a steady rise in the number of credit cards in circulation in Ireland from 2003 to 2008, peaking at 2.2 million, an increase of 393,000 over five years, which equates to a rise of 22%. This trend levelled off in 2009 when the number of personal credit cards on issue remained at 2.2 million. The number of personal credit cards in circulation in 2012 was 1.94million which represents a decline of -9% on 2010. The number has continued to fall in 2013 reaching 1.87 million in June of this year, an annual decline of 4%, and a decline of -15% from the peak. The number of credit cards in circulation in the UK has also fallen by some 1.5 million from 2009 to 2010, and by a further 1 million in 2011 and a further 1 million in 201227, to a total of about 60 million, the lowest level since 200328. Total outstanding credit card debt dropped by 5% in 2011, leaving the average credit card balance at about £1,000. However, UK consumers are still among the most indebted in the world, with the average UK household still saddled with nearly £8,000 of unsecured debt."

27 Credit Cards in UK, Euromonitor International Jan 14th 2013 28 Precious Plastic, PWC

1975000

2098000

2205000 2198000 2131000

2024083 1936000

1,600,000

1,700,000

1,800,000

1,900,000

2,000,000

2,100,000

2,200,000

2,300,000

2006 2007 2008 2009 2010 2011 2012

2006 -‐ 2012

Personal Credit Cards on Issue

15


CREDIT CARD DEBT – ANNUAL

There was an increase of 31% in credit card debt from 2005 to 2008, or approximately 10% per annum. Growth continued into 2008 but at a slower rate of 8.2%, and reversed altogether in 2009 with a decline of -1% for the year. Total repayments exceeded new spending for ten of the twelve months in 2009 and this trend continued throughout 2010. This decline accelerated in 2011, with net outstanding credit card debt down -5% in December year-on-year. Total outstanding debt on personal credit cards peaked at €3 billion in December 2008; it was down to €2.47 billion at December 2012, a drop of 18%. Credit card spending in the UK was also down – average unsecured credit (credit cards and personal loans) fell by -6% in 2010 and by 5% in 2011, with a small recovery of 1% in 2012. This equates to a reduction in unsecured borrowing of about £500 out of an average of around £8,000 per household. US consumers have also been reducing their credit card debt, down by 10% in 2010, and 11% in 2011, but remaining flat in 2012. The average credit card balance was $7,194 in 2012. 29

29 US Department of Commerce.

15000

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29000

31000

2006 2007 2008 2009 2010 2011 2012

Millions of Euro

2006 -‐ 2012 Constant

16


CREDIT CARD DEBT – MONTHLY

The spike in credit card debt that occurs each December corresponds to the Christmas season. Having grown at a dramatic rate for several years, the level of debt levelled off in 2009 and began a steady decline through 2010 and 2011, with repayments exceeding spending every month for the past three years. Debt fell by -6.1% in December 2012 compared to December 2011. Credit card debt has continued to decline in 2013, down -6.8% in Q1, year-on-year, and down by -9.3% in Q2, reflecting reduced consumer spending. Outstanding indebtedness on credit cards stood at €2.27 billion in June 2013, down from €3 billion at the peak in 2008, a drop of -24%. Plastic card spending in the UK rose by 3.4% in the year to the end of May, with debit cards growing by 4.9% and credit cards remaining flat at 0.0% 30. The plastic card share of total retail sales was 73% in May, split 50% debit and 23% credit cards. US consumer credit has been increasing steadily since 2010, up 3.7% in 2011, and 5.9% in 2012. It has continued to increase in 2013, up by 5.9% in the first quarter, and by 8.3% in May31. The current debt remains approximately 16% below its high of $1.02 trillion in July 2008. 32

30 http://www.theukcardsassociation.org.uk/wm_documents/May%202013.pdf 31 http://www.federalreserve.gov/releases/g19/Current/ 32http://news.yahoo.com/us-consumer-borrowing-credit-card-190112895.html

1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800 3,000 3,200

2007 Ja

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Jun Jul

Aug

Sep

Oct

Nov

Dec

2008 Ja

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Apr

May

Jun Jul

Aug

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2009 Ja

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Apr

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Jun Jul

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2010 Ja

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Jun

July

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Sept

Oct

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2011 Ja

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July

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Aug

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Nov

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€ 0,000

January 2007 -‐ May 2013 Current Outstanding Indebtedness on Personal Credit Cards

17


RETAIL SALES INDEX ANNUAL

Retail Sales Index, Base 2005 = 100

Retail sales, excluding the motor trade, grew exceptionally strongly from 2000 to 2007, with a 32% increase in volume and a 52% increase in value. This was facilitated by a huge increase in shopping space over the 10 years from 2000 -- from 500,000 square metres to a current level of 3.3 million square metres. Retail sales have fallen each year since 2007. The decline in volume from the peak in 2007 to the end of 2012 was -10%, while value declined by -16%. Retail sales stabilised in 2012, with volume decreasing by just -0.2% for the full year, and value increasing by 0.4%. 2012 was a tale of two halves, however, with sales volume down by -2.1% in Q1 and by -1.1% in Q2 year-on-year, but increasing slightly in the third (0.6%) and fourth quarters (1.5%). Retail sales in the UK have also been affected during the recession but not to the same extent. In fact, the index of volume sales in 2012 was more or less the same as in 2007. Retail sales in the US rebounded quite strongly in 2011, up 7.7% from 2010 which, in turn, increased 5.9% from 2009 (which had declined -2.5%). Sales were up 5.2% in 2012. Sales are estimated to rise 3.4% in 2013, their slowest rate since 2010.33

33 All Businesses Excluding Motor Trade 2005 - 2011, Retail Sales Index Value and Volume Unadjusted (Base 2005=100), www.cso.ie CBRE Richard Ellis Retail Reports Central Statistics Office ONS Retail Statistics December 2012 US Census Bureau Wall Street Journal January 28, 2013.

100

108.1

115.8 114.9

102

97.4 95.7 96 100

107.6

115 111.7

104.2 102

99.8 99.65

80

90

100

110

120

2005 2006 2007 2008 2009 2010 2011 2012

2005 -‐ 2012 Value Volume

18


RETAIL SALES INDEX MONTHLY

Retail Sales Index = Base 2005 = 100

The seasonal peak in spending that usually occurs in November and December recovered somewhat in 2011 and 2012, although still a long way below 2007. For the year 2012 as a whole, retail sales stabilised, with volume decreasing by just -0.2%, and value increasing by 0.4%, year-on-year. 2012 was a tale of two halves, however, with sales volume down by -2.1% in Q1 and by -1.1% in Q2 year-on-year, but increasing slightly in the third (0.6%) and fourth quarters (1.5%). Retail sales have continued to be weak in 2013, up by a very modest 0.6% in volume in Q1, year-on-year, but down again by -0.4% in volume and by -0.9% in value in Q2. However, these averages conceal quite a bit of variation, with increases in several categories (notably paints, hardware, and electrical goods), and decreases in others (clothing, footwear, pharmaceuticals, books and stationery). UK retail sales showed a modest growth in sales volume up by 0.9% in Q2, 2013, year-on-year. This was largely driven by growth in non-store retailing and department store sales34 US retail sales increased 4.4% in Q2 2013 compared to last year. In fact, June 2013 was the 44th consecutive month of growth with most retail categories benefitting. 34http://www.ons.gov.uk/ons/rel/rsi/retail-sales/june-2013/index.html

80

90

100

110

120

130

140

150

160

2007 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2008 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2009 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2010 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2011 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

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2012 Ja

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Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2013 Ja

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Mar

Apr

May

June

January 2007 -‐ June 2013 Value Volume

19


SALES OF PRIVATE CARS ANNUAL

Sales of Private Cars, 2006-201235

Car sales are a leading indicator of activity in the wider consumer market. In Ireland, the motor industry grew strongly during the economic boom, peaking in 2007 with 180,754 new cars sold. Sales of new cars have dropped steadily since then, with the most dramatic fall from 2008 to 2009, when just 54,432 new cars were sold, a drop of -63% The market rebounded in 2010, with 84,907 new cars sold, influenced by the scrappage scheme which accounted for 20% of sales. 2011 saw a further slight increase in the sale of new cars, to 86,932, up 2.4% on the previous year. Sales in 2012 resumed a downward trend, with 76,256 new cars sold, a -12% decrease from 2011, and that trend has continued in 2013. The second-hand car market also increased in the boom years, to a peak of 60,000 in 2008. This figure dropped back to 49,464 in 2009 and 39,103 in 2010. Sales rebounded slightly in 2011, to 41,149, but dropped again in 2012, to 38,469, (-6.5%). In contrast, 2012 saw a 5.3% increase in the sale of new cars in the UK, with over 2.04 million new vehicles registered, the highest level since 2008. US auto sales peaked in 2005 and bottomed out at 10.6 million vehicles in 2009. Growth resumed in 2010(+22%) and 2011(+10%), and 2012 was up by a further 8.6%, to 14 million vehicles -- still 2 million off the peak.

35 30CSO Vehicles Licensed for the First Time by Type of Vehicle Registration and Year, 2006-2012. 31. (http://www.irishtimes.com/newspaper/breaking/2013/0109/breto king37.html). 35 (http://useconomy.about.com/b/2013/01/17/december-retail-sales-encouraging.htm ).

0

50000

100000

150000

200000

250000

300000

2006 2007 2008 2009 2010 2011 2012

2006 -‐ 2012 New Private Cars Secondhand Private Cars Total

20


SALES OF PRIVATE CARS MONTHLY

Private Vehicles Licensed for the First Time, Number of Units36

The variance in car sales over each twelve months is due to seasonality, with new car sales traditionally concentrated in January and February. The recent introduction of a new registration system with the year divided into two halves (131 and 132) is intended to help to even out the sales across the year. Sales of new cars have continued to be weak in 2013, reaching 49,503 in the first half of the year, which is down by 9,433 units or -16% from 2012. The month of June was particularly weak, with only 3,293 new cars licensed, compared with 5,481 in June 2012. However, the June figure was depressed by the start of the new registration plate in July, and sales in that month have been exceptionally strong at 11,621compared to 4,410 last year. 37 For the year to the end of July, sales are 64,618 which is still -8.7% less than the 70,774 cars sold last year. In contrast, sales of second-hand cars increased by 23% in the first six months of the 2013, year-on-year, from 19,224 cars to 23,693. Sales of cars in the UK were up 10% for the first half of the year, as the new car market there saw the 16th successive monthly rise in June. 38 US Car sales also continued to grow in 2013, with sales for the first half year up 7% on 2012. US car manufacturers reported their strongest monthly sales in June 2013 since the beginning of the recession. 39

36Vehicles Licensed for the First Time (Number) by Month and Type of Vehicle Registration, New and Second Hand Private Cars, www.cso.ie. 37 http://www.motorcheck.ie/blog/new-car-sales-july-2013/ 38 https://www.smmt.co.uk/members-lounge/member-services/market-intelligence/vehicle-data/monthly-automotive-data/ 39 http://www.bbc.co.uk/news/business-23150656

0

5000

10000

15000

20000

25000

30000

35000

40000

2007 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2008 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2009 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2010 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2011 Ja

n Feb

Mar

Apr

May

June

July

Aug

Sep

Oct

Nov

Dec

2012 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2013 Ja

n Feb

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January 2007 -‐ June 2013 New Private Cars Secondhand Private Cars Total

21


RETAIL SALES – DEPARTMENT STORES ANNUAL

Retail Sales Index – Department Stores, Base 2005 = 10040 In line with general retail trends, sales through department stores increased continuously over the period from 2000 to 2007, with an overall growth of 42% in volume and 49% in value. Sales revenues have declined every year since then, down -23% to the end of 2012, reflecting regular price discounting used to stimulate sales. Sales volumes held up much better, down by just -4% over the five year period. Department store sales continued a downward trend in the first and second quarters of 2012, down by -5.3% in volume in and by -5% in value compared to 2011. Sales rallied significantly in Q4, with the seasonal peak up 7.4% in volume and 7.5% in value year- on- year. For the year as a whole, sales volume and value ended up more or less the same as in 2011. Department store sales in the UK experienced a large drop in 2012, down -8.4% in volume and -6.6% in value. This may be partly due to the continuing growth in internet shopping which accounted for 9.1% of sales in December 2012.41 In the US, department store sales increased strongly in the first half of 2012, up 9%, due to an increase in incomes and good employment numbers. However, sales decreased in Q3 and Q4 resulting in a slight reduction in sales of -1% for the year as a whole.42

40 Department Stores 2006 - 2011, Retail Sales Index, Value and Volume Unadjusted (Base 2005=100), www.cso.ie 41 ( Hamilton, S. (2013, January 18). U.K. Retail Sales Unexpectedly Decline Around Christmas. Retrieved January 28, 2013, from Bloomberg: http://www.bloomberg.com/news/2013-01-18/u-k-retail-sales-

unexpectedly-fall-in-key-christmas-period-2-.html) 42 U.S. Census Bureau

107.1

112

106.3

90.1 87.8

85.1 85.7

108.5

116.1

113.6

107.1

113 110.15 111

80

90

100

110

120

2006 2007 2008 2009 2010 2011 2012


22


RETAIL SALES INDEX – DEPARTMENT STORES MONTHLY

Retail Sales – Department Stores, Base 2005 = 10043

Department stores have a marked seasonal pattern, which peaks each year in the pre-Christmas period and with a smaller increase in July coinciding with summer sales. This peak was somewhat subdued during the recession years but has been recovering recently, with 2012 reaching a new peak compared to the previous one in 2007, with sales volume in Q4 up by 7.4% year on year, and value up by 7.5%. Department store sales grew marginally in Q2 2013 on Q2 of last year. Sales increased by 1.4% in volume but only 0.4% in value on last year’s figures reflecting the trend of discounting becoming more widespread. 44

Non-specialised department stores sales in the UK increased by 3.3% in volume in June 2013 when compared with June 2012. Feedback from department stores suggests that sales had increased due to promotions and consumers buying clearance items across a wide range of products. The value of sales in June increased by 2.5% compared to the same month last year. 45 Weak consumer confidence, low disposable income and the success of online retail continues to have a negative impact on US department store sales. Sales dropped by -5.3% in Q2 2013 year-on-year, and for the first half of the year were down -4.9% on the same six month period last year. 46

43Department Stores 2005 - 2011, Retail Sales Index Value and volume Unadjusted (Base 2005=100), www.cso.ie *Visible data labels refer to value of sales. 44http://www.finfacts.ie/irishfinancenews/article_1026343.shtml *Visible data labels refer to value of sales. 45http://www.ons.gov.uk/ons/rel/rsi/retail-sales/june-2013/index.html 46http://www.prweb.com/releases/2013/5/prweb10768958.htm

0

50

100

150

200

250

2007 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2008 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2009 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2010 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

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Dec

2011 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

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Nov

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2012 Ja

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Mar

Apr

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Jun Jul

Aug

Sep

Oct

Nov

Dec

2013 Ja

n Feb

Mar

Apr

May

June


23


RETAIL SALES – FOOD ANNUAL

Retail Sales Index – Food, Base 2005 = 10047 Food sales increased steadily in the period between 2005 and 2008 along with most other retail categories. The volume of food sold from 2005 to 2008 increased by 16%, an average annual growth rate of 5.3%. The value of food sales increased even more, by 24%, an average annual rate of growth of 7.9%. As an essential item, sales of food have held up relatively well in the current recession. From the peak in 2007 to the end of 2012, volume declined by just -0.3%, and value by -4%.The volume of food stayed steady in 2010 while value declined by a relatively modest -2.6%. 2011 saw very little change in either the volume or value of food bought in this country when compared to 2010 figures. In 2012, sales of food increased 1.3% in volume and 5.2% in value. The grocery sector is currently worth about €9 billion in Ireland and average weekly spend is €101.48 Branded goods account for 54% of spend, down from 58% in 2007, and own labels 35%. The discount chains, Lidl and Aldi, are continuing to grow their share of the market, reaching a combined share of 13.1% of the grocery market this year.49 The food sector accounts for 42% of all retail spending in the UK. In 2012, food sales volume decreased by 0.9% while value increased by 1.9%. Food sales in the US performed well over 2012 increasing by 3.3% in value year.

47 CSO Retail Sales Index Value and Volume Unadjusted (Base 2005=100). 48 NCA/Kantar Worldpanel Presentation, March 2012. 49 Irish independent April 30, 2013

109.7

119.5

124

116

113 113.5

119.4

108.9

116.5 115.9

111.4 112.5 112

113.4

100

105

110

115

120

125

130

2006 2007 2008 2009 2010 2011 2012


24


RETAIL SALES – FOOD MONTHLY

Retail Sales Index – Food, Base 2005 = 10050

Sales of food are normally steady throughout the year with a small peak in the pre-Christmas period, followed by a return to trend in January. The volume of food sold in Ireland in December 2011 was up by 1.1% year-on-year and value was up by 2.3% suggesting that the price discounting of 2009 has become less widespread. Food sales increased in Q1 of 2012, up by 1.1% in volume and by 1.8% in value. This positive trend continued in Q2 with sales volume up 2.3% and value up 1.1% compared to the same quarter last year. In Q3, food sales continued to rise, with a 1.9% increase in volume and a 3.1% increase in value. In Q4 2012, food sales increased by 1% in volume and by 3% in value. The grocery sector remained steady in the first half of 2013, up by 0.1% in volume and 0.8% in value. Sales through supermarkets increased by 0.4% in volume and 1.1% in value in Q2, year-on-year. In the UK, food store sales volume fell by -1.3% in June 2013 when compared with June 2012, while the value of sales increased by 2.3% this is due in part to an increase in prices in the sector. 51 Food retail sales in the US increased by 3.1% in Q1 2013 year-on-year and continued to grow reflecting the moderately paced recovery of the overall US economy. Sales were up 1.6% on the same period of last year, and overall rose by 2.3% for the full half year on 2012 figures. 52 Visible data labels refer to value of sales. 50 Food 2006 - 2010, Retail Sales Index Value and Volume Unadjusted (Base 2005=100), www.cso.ie 51 http://www.ons.gov.uk/ons/rel/rsi/retail-sales/june-2013/index.html 52 US Census Bureau advance monthly sales for retail and food services March 2013

80

90

100

110

120

130

140

150

2007 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2008 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

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2009 Ja

n Feb

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Apr

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Jun Jul

Aug

Sep

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2010 Ja

n Feb

Mar

Apr

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Jun Jul

Aug

Sep

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2011 Ja

n Feb

Mar

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2013 Ja

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25


RETAIL SALES - PHARMACEUTICAL, MEDICAL & COSMETICS ANNUAL

Retail Sales Index – Pharmaceutical, Medical and Cosmetic Articles Base 2005 = 10053 Like other retail categories, sales of pharmaceutical, medical and cosmetic goods increased steadily in the period between 2000 and 2008. The volume of sales during that time increased by 50%, an average annual growth rate of 6%. The value of sales increased even more, by 79%, an average annual growth rate of 10%. Like all other categories, this sector suffered a decline in the recession years since 2008 although, as this category includes essential medicines, it suffered less than some other categories. Sales volume fell be just -7% from the peak in 2008 to the end of 2012, an average annual drop of just-1.5%. Value declined by considerably more, at-15% from peak to the end of 2012, an average annual drop of -4%. Sales of this category stabilised in 2012, up by 1.4% in volume and 0.3% in value. Pharmacies in the UK have also been pressure in recent years, partly due to falling consumer spending, but also due to government cutbacks. Average pharmacy revenue decreased by -21.3% from 2008 to 2012, an annual decline of -5%54.

54 Pharmaceutical, Medical and Cosmetic Articles 2006 - 2010, Retail Sales Index Value and Volume Unadjusted (Base 2005=100), www.cso.ie 54http://www.fitzgeraldpower.ie/uploads/publications/2012_Retail_Pharmacy_Benchmarking_Study.pdf

110.3

118.8 121

116.5

110.9

102.4 102.7

110

119 119.9 118.8 118

111.1 112.7

90

95

100

105

110

115

120

125

2006 2007 2008 2009 2010 2011 2012


26


RETAIL SALES – PHARMACEUTICAL, MEDICAL, AND COSMETICS MONTHLY

Retail Sales Index – Pharmaceutical, Medical and Cosmetic Articles Base 2005 = 10055

Sales of Pharmaceutical, Medical and Cosmetic Articles are normally steady throughout the year with a significant increase in December reflecting gift buying of cosmetics and toiletries. This peak has been lower each year since 2008, until December 2012, which saw an increase of 4.6% in volume and 3.3% in value year-on-year. That rally was not sustained, however, with a significant drop in sales again in 2013. This year sales of pharmaceutical, medical and cosmetic articles continue to fall as sales decreased in volume and value by -4.9% and -3.9% in the first quarter, year-on-year. This trend has stayed in place in Q2 also, with volume sales down by -4.4% and value by –2.9% compared to last year. Pharmacies in the UK have also been pressure in recent years, partly due to falling consumer spending, but also due to government cutbacks. Average pharmacy revenue decreased by -21.3% from 2008 to 2012, an annual decline of -5%56. In the US, Health and Personal Care Stores Sales increased by 0.3% in the first six months of the year, year-on-year. This is in line with forecasted returns to modest growth in 2013. 57

55 Food 2006 - 2010, Retail Sales Index Value and Volume Unadjusted (Base 2005=100), www.cso.ie 56http://www.fitzgeraldpower.ie/uploads/publications/2012_Retail_Pharmacy_Benchmarking_Study.pdf 57http://www.evaluategroup.com/Public/PressReleases/Return-to-Growth-for-Pharmaceutical-Sector-World-Preview-2013-Outlook-to-2018.aspx

80

90

100

110

120

130

140

150

160

170

2007 Ja

n Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

2008 Ja

n Feb

Mar

Apr

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Jun Jul

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2013 Ja

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27


RETAIL SALES – BOOKS, NEWSPAPERS AND STATIONARY ANNUAL

Retail Sales Index – Books, Newspapers and Stationary Base 2005 = 10058 The books, newspapers and stationery sector which includes specialist book stores as well as newsagents has been one of the hardest hit sectors during the past five years. Sales volume has declined by -40% from the peak in 2007 to the end of 2012, an annual decline of -8%, and value has declined by -37%. This is partly due to the recession, but is also evidence of a fundamental shift towards digital media which has been causing a steady decline in sales of all print media. Irish newspapers began to lose circulation over a decade ago but the trend has accelerated since the recession. Circulation of the three main dailies fell -18% in the three years to the end of 2012, and the total decline from peak is almost -30%59. This is part of an international trend which has seen newspaper circulation decline by -25% in Europe 13% in the US over the past five years.

Book sales have also fallen dramatically, mainly due to the effect of the internet. In the UK, 38% of book sales were online in 2012, and that figure is forecast to increase to over 50% in the next year or two60. In 2012 in the US, online channels accounted for more book purchases than bricks-and-mortar retail, for the first time ever61.

58 CSO Retail Sales Index Value and Volume Unadjusted (Base 2005=100). 59 http://www.independent.ie/opinion/columnists/colm-mccarthy/newspapers-must-not-be-hindered-by-careless-policy-29453952.html 60 http://www.emarketer.com/Article/UK-Book-Sales-Move-Online-Even-Ebooks-Stall/1009770 61 http://www.digitalbookworld.com/2013/e-retailers-now-accounting-for-nearly-half-of-book-purchases-by-volume/

104.5 107.8

102.1

87 80.3

72.4 67.9

101.6 102.3 93.5

79.8 72.5

65.9 61.5

0

20

40

60

80

100

120

2006 2007 2008 2009 2010 2011 2012


28


RETAIL SALES INDEX – BOOKS, NEWSPAPERS & STATIONARY MONTHLY

Retail Sales – Books, Newspapers and Stationary Base 2005 = 10062

Sales of books and stationery have two peaks in the average year, one in August/September coinciding with back to school time, and a second in the pre-Christmas period. A review of the graph above shows that these peaks have been on a steady downward trend since the end of the boom period in 2007. Sales of books, stationary and newspapers have continued to fall in 2013, down by -4.3% in volume and -3.9% in value in Q2 compared to 2012 figures.

British publishers reported record sales for 2012, despite the recession. Total spending on printed and digital books rose 4% to £3.3bn last year63. This was reversing a previous trend where sales of books, both print and online, were declining by about -2% per year. This was partly attributed to a few publishing sensations that boosted sales above normal.

US book store sales rose by 0.17% in the first five months of 2013 year-on-year. There was a major deceleration in sales between the first and second quarter with May’s sales just over 50% of January’s sales64 62Books, Newspapers and Stationary 2005 - 2011, Retail Sales Index Value and volume Unadjusted (Base 2005=100), www.cso.ie *Visible data labels refer to value of sales. 63 Publishers Association 64http://www.retailgeeks.com/category/monthly-census-bureau-sales-data-analysis/

0 20 40 60 80 100 120 140 160 180

2007 Ja

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Sep

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Nov

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2008 Ja

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29


RETAIL SALES – BARS ANNUAL

Retail Sales Index – Bars, Base 2005 = 10065 The bar trade in Ireland has been in decline for the past decade as a result of a combination of factors including the introduction of the smoking ban and random breath testing, and changing consumer lifestyles. The volume of bar sales decreased by -26% from 2000 to 2010, with a regular annual decline of around -2.5%. The value of bar sales decreased by slightly less, by -19.4% in total, or -1.9% per year, due to increases in prices and taxes.

From the peak in 2007 to the end of 2012, volume sales through bars decreased by -37% and value by -30%. Over the same period, the number of pub licences reduced from 9,500 to 8,300, a drop of -13%.

This downward trend continued in the first half of 2012, with sales volume and value down about -8%, year-on-year. This trend reversed in the second half, and sales in Q4 of 2012 were down just -0.4% in volume, while up by 1.5% in value. All in all, sales volume and value were down by just less than -5% for the year. A similar trend has been experienced in the UK, with sales down by an average of -5% each year since 2008.66. There are currently 51,178 pubs in the UK, down from 60,000 in 2000, and from 58,000 in 2005.

65 Bars 2005 - 2010, Retail Sales Index Value and Volume Unadjusted (Base 2005=100), www.cso.ie,All figures relate to on-trade sales. 66 British Beer and Pub Association

103 105 101.8 92.8

80.6 76.2 73.1

100.5 98.9 92.1

82.8 74.1

70 62.2

0

20

40

60

80

100

120

2006 2007 2008 2009 2010 2011 2012


30


RETAIL SALES – BARS MONTHLY

Retail sales Index – Bars, Base 2005 = 10067

Bar sales follow a seasonal pattern with a peak in the run up to Christmas followed by a trough in January each year. This conceals a long-term decline in the pub trade which is showing little sign of abating. Sales volume was down by about -5% in 2011 and by the same amount in 2012.However, the rate of decline slowed in the latter part of 2012 and were particularly strong in December 2012, up by 2.4% in volume and by 5.4% in value, compared to 2011. Unfortunately, this positive trend did not continue into 2013, with sales down by -3.1% in volume and by -0.5% in value in Q2, year-on-year. UK beer sales have also been following a parallel track; on-trade sales were down -5.8% and off trade sales by -3.6% in Q2, 2013, year-on-year. Admittedly, these figures are compared to a quarter last year that included Euro 2012 and the Queen’s Diamond Jubilee. 68

In the US, in contrast, US Food Services & Drinking Places reported their 37th consecutive month in which year-on-year sales growth exceeded 3 for the first half of the year sales were up 3.8% on the same period last year.

67 Bars 2006 - 2011, Retail Sales Index Value and volume Unadjusted (Base 2005=100), www.cso.ieall figures relate to on-trade sales. 68http://www.beerandpub.com/news/uk-beer-sales-down-4-8-per-cent-in-q2-new-beer-barometer-from-the-bbpa

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RETAIL SALES HOUSEHOLD EQUIPMENT – ANNUAL

Retail Sales Index – Household Equipment, Base 2005 = 10069

Household equipment is the sum of three retail sub-categories: furniture and lighting; hardware, paints and glass; and electrical goods. All of these items are highly dependent on the housing market, particularly on the number of new homes. Sales of household equipment grew rapidly in line with the boom in housing construction, reaching a peak in 2007, following the year in which 90,000 new homes were built. However, sales declined just as rapidly, falling by -18% in volume and -40% in value from the peak in 2007 to the end of 2012. The rate of decline slowed, however, through 2010, and again in 2011. In 2012 household equipment actually increased by 8.5% in volume and by 3.1% in value. However, individual categories within household goods displayed considerable variations in their sales. Furniture and lighting decreased by -6.7% in volume and by -10.9% in value in Q4 2012, year-on-year, hardware, paints and glass were flat, while electrical goods increased by 17.1% in volume and 11% in value. Sales of household goods have also been weak in the UK, down -3.6% in volume and -0.9% in value in 2011, and were virtually flat in 2012, with an increase of just 0.1% in volume and a 0.2% in value compared to 2011. 70 Sales of household goods in the US increased by 7.7% in value in 2012, while electrical appliances decreased by 0.7%.71

69 Household Equipment 2006 - 2011, Retail Sales Index Value and volume Unadjusted (Base 2005=100), www.cso.ie 70 (ONS) 71 (US Census Bureau)

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Retail Sales Index – Household Equipment, Base 2005 = 10072 Sales of household goods are quite seasonal with a small peak in June/July each year coinciding with the summer retail sales, and a bigger peak in the pre-Christmas period. The annual peak in sales volume reached its highest level in December 2012, since its peak in 2008. However, sales value was significantly lower, reflecting the extensive discounting that has occurred. Sales volume of household equipment decreased in the first half of 2012, down -7.5% in volume and -3.9% in value. In a significant turnaround, it increased by 5.6% in Q3 and by 10.3% in Q4, while value remained steady (0.8%). Sales of household equipment have continued this positive momentum in 2013, up by 4.7% in volume in Q2, year-on-year. Sales value has remained steady year-on-year. Of particular note is the fact that hardware, paints and glass have increased by 6.1%, which is the first time this category has increased in the past five year. Electrical goods are also up, by 5% while furniture and lighting are still weak, declining by -2.3%. Sales of household equipment in the UK are also continuing to be weak, down -3.4% in volume and -3.5% in value in Q1 2013, year-on-year. In the US, sales of furniture and home furnishings increased by over 2% in the second quarter of 2013 compared to 2012 73

72 Household Equipment 2006 - 2011, Retail Sales Index Value and volume Unadjusted (Base 2005=100), www.cso.ie 73http://www.reuters.com/article/2013/07/15/us-retail-sales-idUSBRE96E0CS20130715

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RETAIL SALES CLOTHING, FOOTWEAR AND TEXTILES– ANNUAL

Retail Sales Index – Clothing, Footwear and Textiles, Base 2005 = 10074 Clothing and footwear purchases are price and income elastic which means that they tend to fluctuate along with the health of the economy. Sales of clothing and footwear grew strongly during the boom years and then dropped back just as quickly when economic conditions deteriorated. Sales volume grew by 89% from 2000 to 2007 which is equivalent to 13% per annum, while value increased by 46% or 7% per year. Sales declined dramatically in 2009, down by -5.6% in volume and by -16.2% in value. Sales of clothing and footwear rallied somewhat in 2010, up 3.5% in volume although down -5.4% in value. Sales stabilised further in 2011, down by just -0.9% in volume and -1% in value compared to 2010. In sum, sales volume was down by just -4% from peak to the end of 2012, while value was down -26%. Sales of clothing and footwear stabilised further in 2012, down by just -1.4% in volume and -2.1% in value in Q4 year-on-year. Sales of clothing and footwear in the UK were also weak in 2012, with sales value falling by -2.8% for the year. Online sales in these stores were up 26.3% in December 2012 compared with December 2011, accounting for 10.3% of sales. Sales of clothing in the US increased by 4% in Q4 2012 from the same period in 2011, and by 5.5% for the whole year. 75

74 Textiles and Clothing 2005 - 2010, Retail Sales Index Value and volume Unadjusted (Base 2005=100), www.cso.ie 75 US Department of Commerce, Apparel Retail Sales in December 2012

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RETAIL SALES CLOTHING, FOOTWEAR AND TEXTILES- MONTHLY

Retail Sales Index – Clothing, Footwear and Textiles, Base 2005 = 10076

Sales of clothing, footwear and textiles have a marked seasonal pattern with a large peak in the pre-Christmas period. From 2006 to 2009, sales volume increased by 57% on average from November to December each year. Following a dramatic decline in 2009, sales of clothing and footwear stabilised in 2010 and 2011. Sales decreased further in 2012, but at a fairly low rate. Sales volume was down by about -2% for the year, and value by about -3%. In contrast to the normal seasonal boost, sales were particularly weak in December, down -2.6% in volume and -3.9% in value, probably a reaction to the tough budget. Sales of clothing and footwear are remaining fairly steady in 2013, down by just -0.9% in volume and -2.7% in value in Q2, year-on-year. Clothing and footwear sales are also strengthening in the UK, up by 0.8% in volume in June 2013 compared with June 2012, and up by 2.4% in value.77 Sales of clothing in the US are also doing well, up 3.5% in the first half of 2013 compared to the same period in 2012.78

76 Textiles and Clothing 2006 - 2011, Retail Sales Index Value and Volume Unadjusted (Base 2005=100), www.cso.ie 77 http://static.bdo.uk.com/assets/documents/2013/04/High_Street_Sales_Tracker_-_March_2013.pdf http://www.guardian.co.uk/business/2013/apr/08/springwear-clothes-shops 78 US Department of Commerce, Apparel Retail Sales in December 2012

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The Consumer Market Monitor is published by:

The Marketing Institute of IrelandThe Marketing Institute is the professional body for marketing people and has beenthe voice of marketing in Ireland for the last 50 years. It acts with its members asone voice to promote, support and elevate marketing as a key strategic business tooland facilitates networking amongst the senior marketing community. It also offerstraining solutions, marketing insights, and resources, and has access to the best inclass experts, reports and publications in the marketing profession. The MarketingInstitute is based in their own full-facilities headquarters in Dublin with a network ofmembers all over the country, drawn from all business sectors and reaching fromyoung marketing graduates up to business leaders at executive level. Membership isopen to anyone with professional responsibilities in any of the marketing disciplines,or anyone in academia who is teaching or studying any aspect of marketing.

The Marketing Institute of IrelandMarketing House, South County Business Park, Leopardstown, Dublin 18, IrelandEmail: [email protected], Web: www.mii.ie

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UCD Michael Smurfit Graduate Business SchoolUniversity College Dublin, Carysfort Avenue, Blackrock Co. Dublin, IrelandEmail: [email protected], Web: www.smurfitschool.ie

Contact: Professor Mary Lambkin Email: [email protected]

2013