Christmas. Retail Monitor. Cracking. Christmas. in store for consumers. December

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1 Christmas Retail Monitor 2016 Cracking Christmas in store for consumers December 2016

2 Value for money the key this Christmas As the festive shopping season gets into full swing, retailers remain hopeful of a strong showing in the coming weeks despite a recent consumer wobble. Black Friday and Cyber Monday have come and gone and now we are into the heart of the Christmas shopping period. Overall 2016 has been a mixed bag thus far. Most retail categories had a positive first half of the year with both sales values and volumes showing strong growth. Unfortunately it would appear that the midpoint of the year marked a turning point in more ways than one, with growth slowing and anecdotal evidence from retailers suggesting a general downturn in consumer sentiment and a slowdown in spending. We must remain positive however, the sector remains in growth and the key fundamentals remain strong despite that wobble in consumer sentiment in recent weeks. Disposable income is up again in 2016, employment levels continue to surge and consumers are eyeing further tax cuts, arising from Budget 2017, which are effective from January 1st. All that should make for a more positive consumer this Christmas despite recent uncertainty issuing from geopolitical events and a decline in the pace of general economic growth. Retailers must also be commended for their reaction to that recent softening in consumer demand. Across the sector traders have responded strongly to recent currency challenges by cutting prices and further improving their offering to Irish consumers. We have seen further evidence of the innovative and adaptable nature of the Irish retail sector in this period. Prices across the board are falling and while retailer s margins are under pressure, this Christmas promises to be one of the best value for money festive periods for Irish consumers in many years. We must now hope that Irish consumers respond in kind in the coming weeks, and further endorse the Irish retail offering by voting with their feet and their pockets, thereby making the most crucial period of the year a success for those same retailers. Season s greetings from Retail Ireland. Thomas Burke Director thomas.burke@ibec.ie

3 Irish retail sales as at October % -0.0% 1.6% On a year-to-date basis, the combined value of Irish retail sales is up 2.2% versus 2015, with volume up by 4.7% over the same period. Comparing sales during October to those a month earlier in September, total sales values were unchanged, with volumes posting a -0.4% drop. On an annualised basis, the total value of Irish retail sales (excluding sales of cars and sales in bars) was up 1.6% compared with October 2015, with a 3.8% increase in volume over the same period. Cracking Christmas expected for consumers Irish consumers continue to be strongly motivated by price and value this festive season. CSO data continues to show volume growth to be almost three times that of value growth. Due to recent fluctuations in the value of sterling, Irish retailers will be seeking to cut prices, wherever possible, to minimise the risk of consumer migration across the border to Northern Ireland or online to UK-based retailers during the critical Christmas period. Rising disposable income combined with heavy discounting across all retail categories will result in greater spending power for consumers this Christmas. All retail sales (ex Cars & Bars) (y-on-y, % ch) Volume Value

4 Macro trends Rising employment should raise retailers spirts this Christmas Despite the uncertain economic backdrop of recent months, numbers in employment continues to grow. The latest CSO data indicates that in Q3-2016, total employment reached 2 million. This was the highest level of employment recorded since Q Those employed is now expected to be 2.9% higher this Christmas compared to last Employment growth by year, % f 2017f Recovery in disposable income continues Gross disposable income was up 1.8% in the first half of 2016, having grown 5.3% in With goods prices in the first 10 months of the year down 8.5% on the same period three years ago and the labour market and economy continuing to improve, consumers should benefit from greater spending power this Christmas. Householders have more to spend this Christmas Irish shoppers are expected to spend 160 million more this December compared to the same month last year. The average household will spend in the region of 720 extra this Christmas versus other months of the year. This is a rise from 694 last year and 645 in Growth in consumer spending will be welcome news for the country s retailers.

5 Macro trends Increasing concerns evident in Consumer Sentiment Index The November Consumer Sentiment Index signalled that Irish consumers remain nervous about the general economic outlook and their own personal finances. This was reflected throughout the year by fluctuations in the Consumer Sentiment Index. Increasing consumer concerns are evident in the recent retail sales numbers where value growth slowed considerably in Q Retailers are reacting to this softening in consumer sentiment by engaging in discounting and promotional activities to drive footfall and sales. Discount activity to benefit Christmas shoppers Irish consumer prices have fallen every month since the Brexit vote. The latest CSO data indicates that good prices are down 2.9% year-on-year in Q With a high level of discounting already evident in the run up to Christmas and in addition to the post Christmas sales, consumers will significantly benefit from discount activity over the festive shopping period. E-commerce transactions rising / E-commerce transactions on Irish cards Central Bank statistics show that e-commerce transactions recorded on Irish debit and credit cards jumped by 20% from 1 billion to 1.2 billion between July and September as the value of sterling fell. This was way above profile and is likely to be tracking the currency shift. This trend is likely to continue into the Christmas period

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