The slowdown in growth of household spending in Ireland continued in the final month of 2016, according to the latest data from Visa's Irish Consumer Spending Index, which measures expenditure across all payment types (cash, cheques and electronic payments.) This month’s data shows that consumer spending was up +3.6% year-on-year in December, marginally slower than the +3.9% rise in the previous month. Spending has increased continuously through the 28-month series so far, but the latest rise was the slowest since it began in September 2014.
The rate of expansion has now eased in three consecutive months. Meanwhile, spending was up +4.0% year-on-year in the final quarter of the year as a whole, the slowest rise since the final three months of 2014.
There remained a divergence in performance between the Face-to-Face and eCommerce channels in December, with the sterling exchange rate continuing to entice shoppers to purchase from UK online retailers. eCommerce expenditure continued to increase at a substantial pace (+15.4% year-on-year), despite easing slightly from November's record. Meanwhile, Face-to-Face spending decreased for the third successive month, but the -0.3% year-on-year decline was only marginal and better than the November performance.
While the overall rate of consumer spending has continued to slow, December was a positive month as all sectors, with the exception of Clothing & Footwear, recorded increases in spending. Household Goods expenditure rose at the same solid pace as in the previous month (+4.3%), with consumers purchasing items like home appliances as gifts. The Hotels, Restaurants & Bars sector saw the rate of expansion quicken to a three-month high of +5.8% year-on-year, with a spike in entertainment over the festive period. Food & Drink also posted a return to growth of spending (+2.9% year-on-year) in December following a decline in November, benefiting from increased trade for groceries for Christmas meals.
Transport & Communication posted the strongest rise in spending of the eight broad sectors covered (+11.0% year-on-year) during December, despite the rate of growth easing. Recreation & Culture also posted a weaker rise in expenditure – its slowest since May 2015.
The Clothing & Footwear sector continues to struggle and was the only sector to see a fall in spending over the year, with expenditure declining for the fifth month running. The latest reduction, however, was fractional (-0.2% year-on-year) and the weakest in this negative sequence.
Philip Konopik, Country Manager, Ireland, Visa said:
“The large shift to online shopping in the run-up to Christmas continued in December with consumers seeking to take advantage of the value on offer from UK online retailers due to the sterling exchange rate. Despite this there are a number of positives to be drawn from the data, with a range of sectors such as hotels, restaurants, bars and grocery retailers clearly benefiting from the festive period. The last quarter has seen the growth in overall consumer spending slip below five percent each month however, and it will be interesting to observe whether this trend continues into the first quarter of 2017.”
Commenting on the Consumer Spend Index, David Fitzsimons, CEO Retail Excellence Ireland, said:
“The data is concerning from an Irish high street perspective. Key issues influencing the downward trajectory include post Brexit and Trump sentiment erosion, migration online to UK websites, the rise in discounting activity as sell-through rates struggle, a lack of fluidity in the Irish house market and a period of very clement weather in the run up to Christmas which impact heavily on all fashion categories. We have noted a significant increase in online activity and especially with .co.uk websites during a period of sterling deflation. This has been borne out by DPD reporting a 30% increase in parcel deliveries from the UK to ROI and an 80% increase by Parcel Motel.”
Andrew Harker, Senior Economist at IHS Markit said:
“The final month of 2016 carried on the trend seen throughout the fourth quarter of the year, with growth slowing slightly from November. Once again, the overall expansion was driven by eCommerce, but at least Face-to-Face broadly held its ground in the run-up to Christmas. As we enter 2017, Irish consumers will face a trade-off between a generally improving economic climate and the prospect of further political upheaval, particularly once the UK triggers Article 50 to start the formal process for leaving the EU. Visa’s Consumer Spending Index will continue to offer timely updates on how household expenditure is faring.”
About Visa Inc.
Visa Inc. (NYSE:V) is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. We operate one of the world's most advanced processing networks — VisaNet — that is capable of handling more than 65,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, pay ahead with prepaid or pay later with credit products. For more information, visit our website (www.visaeurope.com), the Visa Vision blog (www.vision.visaeurope.com), and @VisaEuropeNews