Recession and inflation to trim Christmas spend

CHRISTMAS HAS not been cancelled, but it has been cut back. Recession and a high rate of inflation has reduced consumers' ability to splash out on the festive season, according to the annual Deloitte spending survey, with shoppers indicating that they will spend an average of 5.3 per cent less this Christmas compared with last year.

Coupled with the current inflation rate of 4.3 per cent, this suggests that consumer spending power has dropped by almost 10 per cent, Deloitte said.

However, Ireland remains the biggest spender in Europe at Christmas, beating two other recession-struck countries - the UK and Spain - into second and third place. And despite the gloom, the average Irish household still plans to shell out well over €1,000 on gifts, food and the odd tipple.

The average household spend this Christmas will be €1,354, with a generous €688 set to be spent on gifts, €422 on food and €264 on socialising, according to Deloitte.

"Last year, the survey found that consumers were still willing to spend despite a gloomier outlook on the economy. This year, that outlook has deteriorated even further, and the purse strings are finally being pulled tight," said Deloitte's Susan Birrell.

In a sign of increased price sensitivity among shoppers, some 60 per cent of the 672 people surveyed said they would be spending more time this year looking for the best price.

"Retailers should be cognisant of the fact that this year's festive shopper is very different to last year's," said Ms Birrell.

Books, music and clothes are the gifts that Irish adults would most like to receive, while half of gift-buyers said they would buy gift vouchers. The Nintendo Wii tops the wishlist for under-12s, while cold hard cash was the gift of choice among teenagers.

The survey also suggests that 14 per cent of consumers will buy their festive food in discount retailers, up from 7 per cent last year.

The survey of shopping intentions broadly reflects the Central Statistics Office retail sales index, which shows a 6 per cent decline in sales in the year to August, while figures from Retail Excellence Ireland/CBRE show a 7 per cent sales decline in the third quarter, with categories such as menswear, homeware and jewellery the hardest hit.

Retail Excellence Ireland chief executive David Fitzsimons said its members were cautiously optimistic about Christmas, with November sales holding up "okay" so far. "I think the Irish consumer reverts to type when it comes to Christmas," he said. "Christmas is almost more important than recession. People step out of the doom and gloom."

Tom Coffey, chief executive of the Dublin City Business Association, said footfall was holding up despite the recession, although August had been a bad month. But the average transaction values are falling, he said, and mid-market retailers are getting squeezed.

"Instead of buying three things, consumers are buying one thing."

But although consumers are taking longer to part with their money, retailers are relatively upbeat, he said. "You don't cancel Christmas just because a couple of builders have a problem."