Weekly Update September 6th

Friday’s (September 3rd) weaker-than-expected US employment report may lower any expectations that the Federal Reserve will announce any tapering of emergency measure at its meeting later this month. Commentary from Bank of Canada and ECB meetings this week will be closely watched, as well as weekly US jobless claims and the producer price index also scheduled for release later in the week.

Ireland saw strong rebound in consumer spending in Q2        

A striking feature of Ireland’s GDP data published last week was the very sharp 12.6% rebound in consumer spending in Q2 2021. This left the level of consumer spending just 3.6% below pre-pandemic levels. This wasn’t entirely surprising. Retail sales of department stores, clothing and footwear and furniture/lighting surged above pre-pandemic levels in May and June as COVID-19 restrictions were eased. Retail sales volumes fell by 1.7% in July, partially reversing the 3.4% and 2.6% gains in the previous two months – pointing to some easing of momentum.

Consumer rebound continues in Q3; focus on services                                                                  

Retail sales data do not capture those sectors hardest hit by the pandemic – consumer-facing services. Credit/debit card spending rose 2.8% in July, up 9.5% on the year, with a further rebound in restaurants/entertainment and other services categories evident – both up 25% on the year. On September 3rd, the Central Bank updated its figures on daily average card spending to August 30th. Card spending in August averaged €234m, up 14% on the year; for restaurants/dining, card spending was €15m – up from €13m in July.

Consumer spending rebound ahead of schedule                                                                          

The rebound in Irish consumer spending is ahead of schedule. We had forecast a 6.5% rise in consumer spending in Q2 to 9% below pre-pandemic levels. Clearly, the out-turn of 12.6% growth was far stronger. The reason for our error was that consumer spending on services rose by an enormous 17% in Q2, whereas spending on goods (predominantly retail sales) rose only 6.9%. Friday’s credit/debit card data show that the recovery in spending, driven by services, has continued into August.