Retail Sales and Consumer Confidence

If you are wondering whether the drumbeat of bad news at home and abroad (especially abroad) is affecting the retail sector then you are right to so.

We regularly model the statistical relationship between survey findings (our own and our clients) and other market and economic indicators.

One such indicator is consumer confidence, which as we can see right now is trending sharply downwards in Ireland:

 

 

So it's not looking good, is it? But wait, the Consumer Confidence Indicator is a composite of several sub-indicators. So when we look at the influence of confidence on variables like retail sales we often find that one or more of the sub-indicators is a better predictive variable than the main confidence indicator. They can also go in a completely different direction. 

For example, the indicator for 'Current Household Financial Situation' is derived from a survey question which asks:

Q. Which of these statements best describes the current financial situation of your household?

  • We are saving a lot
  • We are saving a little
  • We are just managing to make ends meet on our income
  • We are having to draw on our savings
  • We are running into debt
  • Don’t know

As it happens, that indicator is currently quite positive:

 

It also happens that this sub-indicator - current household financial situation - is the most powerful predictor for most of the retail sectors in the CSO's monthly survey.

You can see this in the table below: we have correlated the financial situation indicator against the seasonally adjusted volume indices for all retail sectors and aggregates, ranking them highest to lowest:

 

The message is clear: consumer sentiment does have a strong influence on consumer spending, but not all measures of sentiment are equal.

It is only when the Irish consumer is feeling the 'bad news' in their pockets that we will begin to see a real impact in Ireland's consumer markets.

 

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