End of the Affair
How we fell in and out of love with debt
An Amárach Research Presentation
March 2009
© Amárach Research, 2009 1
End of the Affair

1. In the Beginning:
if we knew then ...
2. Debt Deflation:
something nasty
this way comes ...
3. Debt-Free Recovery:
some hope ...
End of the Affair 2

1. In the Beginning:
if we knew then ...
End of the Affair 3

Binge Borrowing
4
End of the Affair Source: Goodbody

Premier League Borrowers
5
End of the Affair Source: Goodbody

A Rising Burden
Source: Davy 6
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Tough Going
European Commission, January 2009 7
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2. Debt Deflation:
something nasty
this way comes ...
End of the Affair 8

The Great Deflation
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Hysterical Context
X
ISEQ Down -80.3%
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http://dshort.com/charts/bears/four-bears-large.gif

Housing Half Way There?
Fall of 17% from peak
Fall of 50% from peak
Fall of 80% from peak
In Japan, prices are back to where they were in 1975
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Wrong Way
Source: CSO (www.cso.ie) 12
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Shop ‘til you stop
The contraction in retail
spending is far in excess of
any contraction in incomes
Source: CSO (www.cso.ie)
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Back to the Future
Retail Sales Volume Indices Change
Since
1995 2000 Jan 2009 1995
All Businesses 66.5 100.0 101.0 51.8%
All Businesses Excluding Motor Trade 70.6 100.0 120.8 71.1%
Bars - NACE 55.4 85.0 100.0 79.4 -6.6%
Motor Trades - NACE 50 56.5 100.0 65.8 16.5%
Non-Specialised Stores (Excl Dept Stores) 81.2 100.0 136.6 68.2%
Department Stores - NACE 52.12 52.5 100.0 144.2 174.7%
Food, Beverages and Tobacco 99.7 100.0 96.6 -3.1%
Pharmaceutical, Medical and Cosmetic Articles 57.4 100.0 145.9 154.3%
Textiles and Clothing 47.5 100.0 180.5 280.3%
Footwear and Leather 57.4 100.0 175.6 206.1%
Furniture and Lighting 72.1 100.0 77.2 7.1%
Electrical Goods 49.9 100.0 99.5 99.6%
Hardware, Paints and Glass 68.7 100.0 124.0 80.4%
Books, Newspapers and Stationery 79.8 100.0 84.3 5.6%
Other Retail Sales 53.1 100.0 109.8 106.6%
Source: CSO Database Direct
Source: CSO (www.cso.ie)
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Spooked Consumers
15
Source: ESRI (www.esri.ie)
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Emotional Impact
Total
“The recession hasn't hit me financially but I have
%
changed my spending ways”
Agree strongly
42
(5) Male Female 18-24 25-34 35-44 45-54 55-64 65+
Agree
42% 42% 40% 35% 36% 47% 49% 49%
Strongly (5)
(4) 15% 15% 14% 16% 19% 15% 13% 11%
(4) 15 Neither/nor 14% 18% 11% 19% 15% 16% 16% 18%
(2) 8% 8% 10% 12% 5% 7% 9% 5%
Neither/nor 16 Disagree
21% 17% 25% 18% 25% 15% 13% 17%
strongly (1)
(2) 8
Disagree
19
strongly (1)
Source: Amárach Research ConsumerValue Survey for the National Consumer Agency 2009
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Falling Behind
To what extent is your income:
45%
40%
40%
35%
15-24s
29% 28%
30%
35-44s
25% Munster
65+
20%
ABC1s
15% Males
10%
3%
5%
0%
Rising faster than Keeping pace with Rising slower than Not rising at all
cost of living cost of living cost of living
Source: Amárach Research Life Online 2009,
Telephone Survey, 1,000 adults, nationally representative sample, February 2009
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Starting to Hurt
Finding it difficult to....
Total 18-24 25-34 35-44 45-54 55-64 65+
% % % % % % %
Pay my household 37 43 42 37 35 26
36
energy bills
Pay for the
36 45 40 39 29 22
40
running of my car
Pay for health and
35 39 35 35 39 22
40
medical expenses
Pay for groceries 32 41 35 33 24 26
29
Meet my loan
23 32 24 30 12 15
24
repayments
Meet my mortgage
23 34 27 29 13 7
20
repayments/rent
None of these 44 35 39 46 51 53
44
Source: Amárach Research ConsumerValue Survey for the National Consumer Agency 2009
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The Future On Hold
Postponing Events
Total
Male Female 18-24 25-34 35-44 45-54 55-64 65+
%
Undertaking
Home 34% 38% 32% 41% 46% 42% 30% 19%
Undertaking Home
36 Improvements
Improvements
Going on
33% 34% 37% 42% 43% 28% 27% 19%
34 Holiday
Going on Holiday
Changing Your
Changing Your 29% 29% 24% 38% 36% 32% 23% 13%
29 Car
Car
16 Buying a House 17% 16% 24% 30% 16% 12% 10% -
Buying a House
9 Getting Married 9% 8% 17% 16% 10% 2% 4% -
Getting Married
41 None of These
None of These 41% 41% 42% 31% 31% 40% 47% 65%
Source: Amárach Research ConsumerValue Survey for the National Consumer Agency 2009
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3. Debt-Free Recovery:
some hope ...
End of the Affair 20

All Together
Is the recession affecting you:
60% 56%
65+
55-64s
50%
ABC1s
35-44s
40%
ABC1s
30%
Dublin
30%
Males
20%
11%
10%
0%
More than it is affecting About the same as it is Less than it is affecting
other people affecting other people other people
Source: Amárach Research Life Online 2009,
Telephone Survey, 1,000 adults, nationally representative sample, February 2009
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Not Looking Forward
Effect of the recession in next few months
60%
53%
25-34s
50%
35-44s
Males
40% Internet Users
65+
28%
30% Munster
ABC1s
20%
13%
10%
0%
A major effect A modest effect No effect
Source: Amárach Research 2009,
Telephone Survey, 1,000 adults, nationally representative sample, February 2009
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Not So Tough?
Incidence of personal borrowings and impact:
60%
53%
47%
50%
44%
39%
40%
15-24s
C2DEs
65+
30%
Dublin
55-64s
Males
ABC1s
20%
Non-Internet 12%
Users
10%
4%
0%
No Borrowings Column1 Easily Manageable A cause for A real
Borrowings manageable if careful concern problem
Source: Amárach Research 2009,
Telephone Survey, 1,000 adults, nationally representative sample, February 2009
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Some Regrets
In hindsight, % who regret taking out
current loans
33%
35%
30% 27%
24%
25% 22% 22%
21%
20%
15%
10%
5%
0%
Total Female 15-24s 45-54 C2DE Dublin
Source: Amárach Research 2009,
Telephone Survey, 1,000 adults, nationally representative sample, February 2009
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Until Death
Incidence of mortgage on home:
70% 66%
60%
25-34s
ABC1s
50% 44%
Dublin
40% Munster
34%
30%
23%
22%
20%
10%
10%
0%
No Mortgage Mortgage Column1 Less than 5 5-10 years 11-20 years 20+ years
years
Source: Amárach Research 2009,
Telephone Survey, 1,000 adults, nationally representative sample, February 2009
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Negative Equity?
Expectation for house price
Considerably
if had to sell
less than
25-34s
(base: mortgage holders)
remaining Don't Know,
ABC1s
mortgage, 6% 3%
Munster
Slightly less
Considerably
than remaining About the
exceed
mortgage, 9% same as
remaining
remaining mortgage, 50%
mortgage,
9%
Slightly exceed
remaining
mortgage, 23%
Source: Amárach Research 2009,
Telephone Survey, 1,000 adults, nationally representative sample, February 2009
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Recessions and
Recoveries have one
thing in common:
they are usually well
under way before
they show up in the
official statistics ...
Recessions are
macroeconomic
phenomena in the main
... whereas Recoveries
are microeconomic
phenomena.
End of the Affair 27

The problem of
consumer debt is
concentrated in a small
minority of the
population and is
therefore ‘manageable’
The real problem is the
state of mind of the rest:
it will only be when they
believe the ‘worst is
over’ that spending will
rise and growth return
End of the Affair 28

Amárach Research
11 Kingswood Business Centre
Citywest Business Campus
Dublin 24
T. (01) 410 5200
E: info@amarach.com
info@
W: www.amarach.com
B: www.amarachresearch.blogspot.com
29
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Appendix: About Amárach
We are Ireland’s largest independent market
research agency, in business since 1989.
We focus on delivering two key benefits to our 3rd March 2009
Welcome to the latest edition of consumerforesight from Amárach Research. We
clients: have set out to make consumerforesight a more interactive and informative
research and planning tool for subscribers. Feel free to invite others to register
for our free eLetter on our home page.
1. Consumer Foresight
– using research to say ‘what next’. Two months gone, ten to go. Like Keith Richards, we’re all at the
stage of “it’s good to be here – it’s good to be anywhere”. But it
is tough out there. Against a background of industrial unrest
(even the Gardaí are protesting!), we shouldn’t be surprised if
2. Business Insight consumers are on something of a ‘go slow’ themselves.
– using research to make business decisions. But it won’t last. It’s too early for green shoots, but as time goes
by people will want to buy: especially those still in secure jobs
who are faced with extraordinary bargains in shops, hotels and
car showrooms. Irish consumers don’t really do hair shirts.
When we have money we can afford to spend then we’re usually
We provide the full array of market research inclined to spend it: assuming we’re getting good value and not
being ripped off.
services including: Don’t forget: for every person in Ireland with a mortgage,
loan or ‘maxed out’ credit card there is another person
without any debt (at all). W hat are you doing to tap the
‘worried well’ market?
- Quantitative: face-to-face, telephone, web
- Qualitative: focus groups, in-depths, ethnographic Before you embark on a new brand or Business is about passion: so for that matter is
- Field Only: for international & domestic agencies business just remember Seth Godin’s the economy – check out some wise words on the
three things you need read more role of passion in success read more
With the world all ‘a-twitter’ don’t forget How not to do food marketing: quite possibly the
the future is on the TV read more worst food in the world read more
Register for our free fortnightly eletter It’s all down to psychology – an Amárach Optimistic people are healthy and happy – even
presentation on how Irish consumers will when the economy is collapsing around them:
lead us to recovery read more what are you doing for optimism? read more
consumerforesight at: www.amarach.com
Read our daily blog: Amárach Research will present a paper on ‘Life Online 2009’ at Comreg’s ICT Research conference on 12th
www.amarachresearch.blogspot.com
End of the Affair 30