A new survey indicates, very faintly, that if things are not quite getting better, they could soon stop getting worse
IS IT POSSIBLE we are finally shaking off the economic gloom that has hung over us like a black cloud for more than four years and are now allowing the faintest glimmers of optimism and confidence to shine through? It just might be.
While most people would probably agree it is too early to suggest the recession is coming to an end, a number of economic indicators and surveys published this week suggest consumers are weary of relentlessly scrimping and saving and are starting to allow themselves to think that maybe, just maybe, things are going to get better. Or, at least, that they are going to stop getting worse.
A KBC Ireland/ESRI consumer sentiment survey published on Tuesday shows a dramatic improvement in our outlook as people start to believe that some of the direst fears about the economy might have been overstated by the prophets of gloom.
The index is broken into two parts. One measures consumers’ outlook for the next year and the second focuses on the here and now. Both are positive for the first time in a very long time. In fact, the consumer sentiment index is at its highest for nearly five years, and for seven out of the past eight months sentiment has improved.
“Five years ago, Irish consumers were becoming increasingly nervous about the economic outlook,” says Austin Hughes, the chief economist at KBC Bank. “On the evidence of recent data, those fears are beginning to lift.” He has described trends in consumer sentiment as “consistent with the prospect of a stabilisation in household spending, a development that could make quite a difference to the outlook for domestic economic activity”. According to Hughes, the key feature of this year’s surveys is the unambiguous reduction in the number of consumers who feel things are going to keep getting worse. A year ago, 59 per cent of consumers felt sure the economy would become more depressed. That dropped to 34 per cent this week.
Hughes is not getting out the bunting just yet, and there is no suggestion that the boom times are on the way back. Instead, he believes the improvement in sentiment “is primarily driven by an easing of fears rather than by a more positive view of either the outlook for the Irish economy or for consumer finances”.
The fragile optimism could still be destroyed by another heavy-handed budget with cuts demanded by the troika, and Hughes wonders “whether a still-modest improvement in the mood of Irish consumers can withstand the threat that budgetary changes could markedly reduce household spending power in the coming year”.
Data from the CSO published on the same day focused on retail sales figures, and the news is quite positive. While shops have not been reporting a bumper summer, at least the precipitous falls of recent years have eased.
According to the CSO, the total value of retail sales increased by 0.7 per cent in the year to July. It is not a great figure by any measure, but it is still a lot better than the economy has performed since June 2008. This excludes the year-on-year bounce seen last Christmas over Christmas 2010, which was destroyed by snow.
On Wednesday, the National Consumer Agency published a distinct but not unconnected report that suggests the number of people prepared to shop around for better value across a range of services, including banking, utilities, groceries and telecommunications, has fallen dramatically in the past 12 months as many decide the prices they are being asked to pay might have reached affordable levels.
Although apparent contentment and greater control of finances might account for the reduction in switching, fatigue might also play a part. A study published this summer by Amárach Research found that Irish consumers have tired of chopping and changing.
It found three customer types: switching agnostics, who have never switched, and are unlikely ever to do so; fatigued switchers, who have switched initially but have become less interested in switching as the level of differentiation and saving potential has become less pronounced; and serial switchers, who switch repeatedly for incremental value and have close to zero loyalty to providers or brands.
Its study showed that the switching battle has reached a point where only serial switchers are left. Value in recent years has become synonymous with low price, but focusing only on price has led to a situation where it sometimes costs a company more to get a customer to switch than that customer is worth to them.
ALTHOUGH LOW PRICE does not guarantee value, Ann Fitzgerald, the chief executive of the National Consumer Agency, urges people to keep switching even if they are happy with their current provider, and she reminds people that “offers change quite frequently and consumers should constantly be on the lookout for better value”.
Going for the cheapest option is not always a good idea, but switching across many areas can still save money without affecting quality or service.
If you moved from ESB to Bord Gáis Energy when the Big Switch campaign was rolled out three years ago you may well have saved at least €500. If you had switched car-insurance provider twice in that period you could have saved another €300, and even greater savings are possible in health insurance. A canny person can save a lot of money, and guarantee exactly the same cover, by moving provider.
Another switch the National Consumer Agency has noted is in grocery shopping, with more people changing to cheaper own-brand products. A family that switches to own-brand milk for a year could save more than €200. It’s not a fortune, but, as the saying goes, every little helps.
