Economics: Consumer spending in Ireland has picked up strongly in recent months with retail sales in February showing annual growth of 8.6 per cent in volume terms, compared to a 3 per cent gain in 2004.
Spending on cars is setting the pace and this year looks on course to be the best for the motor trade since 2000 - over 67,000 new cars were licensed in the first quarter, a 16 per cent advance on the previous year, and a total of 200,000 for 2005 as a whole looks achievable. Yet Irish car ownership is not high by European standards, particularly given Ireland's high income per head, so the next few years could well see a continuation of the recent stronger trend, bringing Ireland more in line with experience elsewhere.
Indeed, the figures on relative car ownership in Europe are striking from an Irish perspective. There are about 1.5 million cars in the Republic which, when set against a population of four million, translates into 375 per 1,000 inhabitants. This compares with over 540 in Germany, 490 in France, 460 in Spain and Belgium, and around 450 in the UK. In fact Ireland's figure is the lowest in the euro area, with Portugal the nearest challenger for that position, despite the large disparity between the two countries in terms of income per head.
The gap between Ireland's car ownership and the EU norm widened substantially in the 1980s, but it has been narrowing of late. This a process that might well continue, given Ireland's superior economic performance. In 1980, there were 218 cars per 1,000 Irish inhabitants as against 293 in the EU, putting Ireland at around 75 per cent of the norm. Car sales in the Republic showed little acceleration in the following decade, however, generally growing in an annual range of 55,000 to 60,000, which meant that, by 1990, Irish ownership per 1,000 had fallen to under 60 per cent of the EU average.
The Celtic Tiger changed that, and one can see the influence of higher employment growth on domestic car sales as the 1990s progressed.
Annual sales topped the 100,000 mark for the first time in 1996, before soaring to over 170,000 in 1999 and a record-breaking 225,000 in the millennium year. Consequently, by that date, Ireland had narrowed the car-ownership gap with its EU neighbours, a domestic figure of 340 per 1,000 equating to around 75 per cent of the EU average.
Since then, the gap has closed further, albeit at a more sedate pace, with annual domestic car sales of between 140,000 and 150,000 over the period 2002 to 2004.
The 2005 data point to a step change, however, reflecting stronger employment growth, an upturn in consumer confidence and the low interest rate environment. Next year also sees the first tranche of SSIAs maturing, which may add an additional €1.5 billion to consumer spending, followed by €4.5 billion in 2007 - and no doubt some of this will find its way to the nearest car showroom.
It would seem reasonable then, that the next few years could see Ireland move even closer to the norm in terms of European car ownership, implying a total car ownership of two million or so by 2010.
The demand this will place on road space is obvious enough, but it need not be associated with increased road deaths as the evidence suggests that this is not correlated with total car numbers.
Road accident deaths in Ireland were at their highest in the 1970s, when car ownership was substantially lower; road deaths never fell below 500 a year in that decade, reaching a record of 640 in 1972. The 1980s saw a gradual improvement and, in recent years, the total has dipped below 400 on occasion, despite the rise in the numbers on the road and the expansion in the scale of the road network. This implies that factors such as road quality, the condition and age of cars themselves, and changing attitudes to drink-driving may be contributing factors.
It is also revealing to put Ireland's road deaths in context, because one is often left with the impression that the numbers are extremely high, and media coverage of road accidents is usually accompanied by the term "carnage". This is not the case historically, as we have seen, nor is it true relative to experience elsewhere in the EU.
The annual Irish figure in recent years equates to around 10 per 100,000 of population, which is below half the countries of the EU, including France, Austria and Belgium, let alone Greece and Portugal. The Irish figure is substantially above the lowest figures in the EU (the UK, Holland and Sweden come in at around six deaths per 100,000), showing that there is considerable room for improvement but also that an increase in car numbers per se has no direct influence on the deaths outcome.
Dr Dan McLaughlin is chief economist at Bank of Ireland
