Consumer Sentiment - Nov 2011


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Presentation by Laura Reddy, Customer Insight Manager, Sherry FitzGerald Group

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Consumer Sentiment - Nov 2011

  1. 1. ‘ Ireland is not only the world’s most open economy in terms of trade – we appear to be one of the most open in terms of sentiment as well…’ Amarach
  2. 2. Why is sentiment important? <ul><li>… </li></ul>‘ The August retail sales report from the CSO confirms what most of us knew already: the international uncertainty last month scared Irish consumers so much they stayed at home and kept their purses and wallets shut’ Amarach
  3. 3. Where are we now? Increase in November - 63.7 (53.3 Oct). All time low July 2008 – Normal is 88.1 Source: ESRI/KBC
  4. 4. Commentary ESRI/KBC <ul><li>Surprisingly large increase in Sentiment Index points towards some change in consumers’ mood. </li></ul><ul><li>Strong Irish growth data, hopes for ECB rate cut and perhaps even sporting success may have contributed. </li></ul><ul><li>Ireland further along the ‘path of pain’ </li></ul><ul><li>The sharp change in Irish Consumer Sentiment was not seen in other countries. US, UK and Eurozone confidence still very low </li></ul><ul><li>We expect some retracement in November but Irish consumers may be finding some reasons for a little less pessimism. </li></ul>
  5. 5. The recession continues to have a negative impact on us. How have people been impacted?
  6. 6. Life-stage Segment Sizes - B & A Consumer Confidence Tracker (Sample 1,000) Singles Pre-Family Family Pre-Teen Family Teen 38% Empty Nesters Family Pre-School 5% 16% 13% 7% 20% 1.35m 184,000. 550,000 470,000. 250,000 720,000
  7. 7. Life stage analysis B & A Consumer Confidence Tracker (Sample 1,000) By July of this year, lowest levels of confidence are amongst those aged 35-49 years (dependents, debt.) and 50-64 yrs (approaching/planning for retirement) C2DE express lowest levels of confidence re general economy, personal income & future purchasing intentions. ABC1s are the most pessimistic about the future value of their personal assets. The family pre-teen segment (many in neg equity) is the most pessimistic of all in relation to the general economic outlook over the next twelve months.
  8. 8. Irish Consumer Confidence: A Psychological Journey 2009 2007/2008 2010 2010/2011 Shock Anger Acceptance Despair Despondence Celtic Tiger has come to an abrupt halt Most of our economic woes are in fact home-grown. The assumption at this stage is economy has reached the bottom things are likely to improve during 2011. Ireland is bailed out and loses its economic sovereignty People are exhausted at the length and severity of the recession and continued uncertainty
  9. 9. Emerging lifestyle trends - The Mood of the Nation (B&A/SF research) <ul><li>Conspicuous restraint – ‘Smart shoppers’ </li></ul><ul><li>Smart shoppers/consumers – Value and deals </li></ul><ul><li>Home treats – ‘Feel good factor’ ‘Lipstick factor’ </li></ul><ul><li>Nesting – Importance of home </li></ul><ul><li>Big Night In – ‘Socialising at home’ </li></ul><ul><li>Pulling together – ‘family/community values’ </li></ul><ul><li>Opting out - Emigrating </li></ul>
  10. 10. Who’s to blame? BLAME <ul><ul><li>Incompetent </li></ul></ul><ul><ul><li>Governance </li></ul></ul><ul><ul><li>and Regulation </li></ul></ul><ul><ul><li>The Global Economic </li></ul></ul><ul><ul><li>Downturn </li></ul></ul><ul><ul><li>Consumers Themselves </li></ul></ul>Reckless Lending Behaviour by ‘the Banks ’
  11. 11. So what do consumers need now? <ul><ul><li>Unemployment Levels. Fears around job security. </li></ul></ul><ul><ul><li>Consumer Credit. Consumers do not believe for a moment that Irish banks are ‘open for business’ with regard to consumer credit </li></ul></ul><ul><ul><li>Business Credit. Many believe survival of businesses is under threat from a lack of business credit from the banks. </li></ul></ul><ul><ul><li>Property Prices. Some loath to make a home purchase until they can be satisfied that house prices will not drop further. </li></ul></ul><ul><ul><li>Economic Growth Levels. Consumers are confused as to whether the economy is shrinking or growing at the moment. </li></ul></ul>
  12. 12. Consumers have settled on a number of indicators in the absence of a reliable ‘compass’……. Communication is key Personal/Household Income Levels - sense of drop in net take-home pay following budget required – direct/indirect taxes need to spelt out <ul><ul><li>EU/ECB/IMF Timescales. Uncertainty remains as to whether the troika will step in at some stage and impose additional cuts/tax increases. </li></ul></ul><ul><ul><li>Implications of most recent changes to bailout terms. consumer needs idea, how these savings will benefit country in practical terms, even if only at top line level. </li></ul></ul><ul><ul><li>Property. E vidence of initiatives to help revitalise the property market, may convince an unknown % of potential purchasers to take final decision. </li></ul></ul><ul><ul><li>Retirement Fund Values – need info on state pensions, retirement age value of pension funds etc and implications </li></ul></ul>
  13. 13. <ul><li>Collapse in trust in government/banking/state institutions. </li></ul><ul><li>Consumers struggling to understand the complexities of the Irish economy attempting to identify final outcome </li></ul><ul><li>They have adjusted their lives, desires and spending levels. </li></ul><ul><li>An enormous amount of hope has been vested in the government </li></ul><ul><li>No matter how difficult decisions ahead they must be spelt out so consumer can understand personal implications. </li></ul><ul><li>Need to feel government is in control of the situation, has a plan it will stick to and a conviction we will, collectively, get there in the end. </li></ul>Net effect of all of the dynamics analysed in this report …..
  14. 14. The situation in Greece/Italy/ Europe is causing consumer concerns over the prospect of a double dip recession – consumers holding back on their spend October 2011
  15. 15. Future prospects for World and Irish economy? Oct 2011 <ul><li>How do you expect the World economy to fare in the next 6 months? </li></ul><ul><ul><li>Expectations of the World economy are bleaker now than at the onset of the recession with almost 3 in 5 expecting the World economy to fare worse in the next 6 months. </li></ul></ul><ul><li>How do you expect the Irish economy to fare in the next 6 months? </li></ul><ul><ul><li>More than 1 in 5 expect the Irish economy to improve over the next 6 months. </li></ul></ul><ul><ul><li>Almost half do not expect our economy to worsen over the next 6 months. </li></ul></ul>
  16. 16. Summary... <ul><li>The situation in Greece/Europe is causing great concerns among Irish consumers with the worst expectations for the World economy recorded since February 2009. </li></ul><ul><li>This has led to decreased spend and increased concerns over job security and the housing market. </li></ul><ul><li>Yet, expectations for the Irish economy remain relatively unchanged – perhaps indicating a cautious optimism for the Irish situation. </li></ul><ul><li>There is potential for increased spend on socialising and consumer goods if consumers can be assured that the European debt problem will not affect them personally. </li></ul>
  17. 17. Property sentiment <ul><li>Focus groups with first time buyers </li></ul><ul><li>– October 2011 </li></ul><ul><li>Property sentiment survey </li></ul><ul><li>– October 2011 </li></ul>
  18. 18. I have been renting an apartment for ages – I now want to buy a 2 /3 house Irish people want a home – its what we grew up with. Its in the Irish psyche!! We can afford to buy somewhere now we might like to live Great value for money at the moment! I don’t really mind if prices drop a bit further – I will be there for a long time! You cannot go on living in ‘limbo’ – I want a home – a permanent base! There is no such thing as a job for life at the moment – Uncertainty is the new norm!! FTB buyers focus group – Oct 2011 We got loan approval – had to jump through hoops but got it!
  19. 19. Haven't found the right balance between what I want and prices Need to sell first to release cash to buy Finances changing by the day - uncertainty - valuation of house was well below expected No real market to trade Finance availability Prices are still falling Asking price and quality of 2nd hand homes in good areas Can’t find the right house – nothing new coming on Nervous about making such a big purchase What is stopping you buying a property at the moment? Property sentiment survey Oct 2011
  20. 20. ‘ Our tracking research has shown the remarkable emotional strength of the Irish people, who have consistently reported ‘happiness’ and ‘enjoyment’ as their two most frequently experienced emotions. But we are still in recession – and the path to recovery still lies some way ahead’