The Debt Of The Nation

End of the AffairEnd of the AffairEnd of the AffairEnd of the AffairHow we fell in and out of love with debtHow we fell in and out of love with debt

An An Amárach Research Amárach Research PresentationPresentation

March 2009March 2009

1End of the Affair

March 2009March 2009

© Amárach Research, 2009© Amárach Research, 2009

1. In the Beginning:if we knew then ...if we knew then ...

2. Debt Deflation:

something nastythis way comes ...

3. Debt-Free Recovery:

2End of the Affair

3. Debt-Free Recovery:

some hope ...

1. In the Beginning:if we knew then ...

3End of the Affair

Binge Borrowing

4End of the Affair Source: Goodbody

Premier League Borrowers

5End of the Affair Source: Goodbody

A Rising Burden

6End of the Affair Source: Davy

Tough Going

7End of the Affair European Commission, January 2009

2. Debt Deflation: something nasty

this way comes ...

8End of the Affair

The Great Deflation

9End of the Affair

Hysterical Context

10End of the Affair

XISEQ Down -80.3%

http://dshort.com/charts/bears/four-bears-large.gif

Housing Half Way There?

Fall of 50% from peakFall of 50% from peak

Fall of 17% from peak

11End of the Affair

Fall of 80% from peakFall of 80% from peak

In Japan, prices are back to where they were in 1975In Japan, prices are back to where they were in 1975

Wrong Way

12End of the Affair Source: CSO (www.cso.ie)

Shop ‘til you stop

The contraction in retail spending is far in excess of

13End of the Affair

spending is far in excess of any contraction in incomes

Source: CSO (www.cso.ie)

Back to the Future

Retail Sales Volume Indices

1995 2000 Jan 2009

All Businesses 66.5 100.0 101.0 51.8%

All Businesses Excluding Motor Trade 70.6 100.0 120.8 71.1%

Change

Since

1995

All Businesses Excluding Motor Trade 70.6 100.0 120.8 71.1%

Bars - NACE 55.4 85.0 100.0 79.4 -6.6%

Motor Trades - NACE 50 56.5 100.0 65.8 16.5%

Non-Specialised Stores (Excl Dept Stores) 81.2 100.0 136.6 68.2%

Department Stores - NACE 52.12 52.5 100.0 144.2 174.7%

Food, Beverages and Tobacco 99.7 100.0 96.6 -3.1%

Pharmaceutical, Medical and Cosmetic Articles 57.4 100.0 145.9 154.3%

Textiles and Clothing 47.5 100.0 180.5 280.3%

Footwear and Leather 57.4 100.0 175.6 206.1%

Furniture and Lighting 72.1 100.0 77.2 7.1%

14End of the AffairSource: CSO (www.cso.ie)

Furniture and Lighting 72.1 100.0 77.2 7.1%

Electrical Goods 49.9 100.0 99.5 99.6%

Hardware, Paints and Glass 68.7 100.0 124.0 80.4%

Books, Newspapers and Stationery 79.8 100.0 84.3 5.6%

Other Retail Sales 53.1 100.0 109.8 106.6%

Source: CSO Database Direct

Spooked Consumers

15End of the Affair Source: ESRI (www.esri.ie)

Emotional Impact

“The recession hasn't hit me financially but I have changed my spending ways”

%

Total

42

15

16

changed my spending ways”

Male Female 18-24 25-34 35-44 45-54 55-64 65+

Agree Strongly (5)

42% 42% 40% 35% 36% 47% 49% 49%

(4) 15% 15% 14% 16% 19% 15% 13% 11%

Neither/nor 14% 18% 11% 19% 15% 16% 16% 18%

(2) 8% 8% 10% 12% 5% 7% 9% 5%

Disagree 21% 17% 25% 18% 25% 15% 13% 17%

Agree strongly (5)

(4)

Neither/nor

16End of the Affair

Source: Amárach Research ConsumerValue Survey for the National Consumer Agency 2009

8

19

Disagree strongly (1)

21% 17% 25% 18% 25% 15% 13% 17%

(2)

Disagree strongly (1)

Falling Behind

40%40%

45%

To what extent is your income:

3%

29% 28%

5%

10%

15%

20%

25%

30%

35%

65+ ABC1sMales

15-24s 35-44sMunster

17End of the Affair

Source: Amárach Research Life Online 2009,

Telephone Survey, 1,000 adults, nationally representative sample, February 2009

3%

0%

5%

Rising faster than cost of living

Keeping pace with cost of living

Rising slower than cost of living

Not rising at all

Starting to Hurt

Finding it difficult to....

Total 45-54 55-64 65+

% % % %

18-24 25-34 35-44

% % %

43

45

39

41

32

Pay my household energy bills

Pay for the running of my car

Pay for health and medical expenses

Pay for groceries

Meet my loan repayments

% % % %

35

29

39

24

12

36

40

40

29

24

37

36

35

32

23

% % %

37

39

35

33

30

42

40

35

35

24

26

22

22

26

15

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34

35

repayments

Meet my mortgage repayments/rent

None of these

13

51

24

20

44

23

44

29

46

27

39

7

53

The Future On Hold

Postponing Events

Male Female 18-24 25-34 35-44 45-54 55-64 65+

Total

%Undertaking Home Improvements

34% 38% 32% 41% 46% 42% 30% 19%

Going on Holiday 33% 34% 37% 42% 43% 28% 27% 19%

Changing Your Car 29% 29% 24% 38% 36% 32% 23% 13%

Buying a House 17% 16% 24% 30% 16% 12% 10% -

Undertaking Home Improvements

Going on Holiday

Changing Your Car

Buying a House

%

36

34

29

16

19End of the Affair


Getting Married 9% 8% 17% 16% 10% 2% 4% -

None of These 41% 41% 42% 31% 31% 40% 47% 65%

Getting Married

None of These

9

41

3. Debt-Free Recovery: some hope ...

20End of the Affair

All Together

56%

50%

60%

Is the recession affecting you:

65+55-64s

11%

30%

10%

20%

30%

40%

50%

35-44s

ABC1sDublin

Males

55-64s

ABC1s

21End of the Affair

Source: Amárach Research Life Online 2009,


0%

10%

More than it is affecting other people

About the same as it is affecting other people

Less than it is affecting other people

Not Looking Forward

53%60%

Effect of the recession in next few months

25-34s

28%

13%20%

30%

40%

50%25-34s 35-44sMales

Internet Users65+

MunsterABC1s

22End of the Affair

Source: Amárach Research 2009,


13%

0%

10%

A major effect A modest effect No effect

Not So Tough?

53%60%

Incidence of personal borrowings and impact:

47%

39%

44%

12%20%

30%

40%

50%

65+ 55-64s

ABC1s

Non-InternetUsers

15-24sC2DEsDublin

Males

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4%

0%

10%

No Borrowings

Borrowings Column1 Easily manageable

Manageable if careful

A cause for concern

A real problem

Users

Some Regrets

33%35%

In hindsight, % who regret taking out current loans

21% 22%

33%

22%24%

27%

10%

15%

20%

25%

30%

35%

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0%

5%

Total Female 15-24s 45-54 C2DE Dublin

Until Death

66%

60%

70%

Incidence of mortgage on home:

34%

22%

44%

23%

10%

20%

30%

40%

50%

60%25-34sABC1s

Dublin

Munster

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10%

0%

10%

No Mortgage Mortgage Column1 Less than 5 years

5-10 years 11-20 years 20+ years

Negative Equity?

Considerably less than remaining Don't Know,

Expectation for house priceif had to sell

(base: mortgage holders)25-34s

ABC1s

Considerably exceed

remaining mortgage, 50%

About the same as

remaining mortgage,

9%

Slightly less than remaining mortgage, 9%

remaining mortgage, 6%

Don't Know, 3%

(base: mortgage holders)ABC1sMunster

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Slightly exceed remaining

mortgage, 23%

Recessions and Recoveries have one

thing in common: they are usually well

under way before under way before they show up in the

official statistics ...

Recessions are macroeconomic

phenomena in the main

27End of the Affair

phenomena in the main ... whereas Recoveries

are microeconomic phenomena.

The problem of consumer debt is

concentrated in a small minority of the

population and is population and is therefore ‘manageable’

The real problem is the state of mind of the rest:

it will only be when they

28End of the Affair

it will only be when they believe the ‘worst is

over’ that spending will rise and growth return

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29End of the Affair

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3rd March 2009

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Two months gone, ten to go. Like Keith Richards, we’re all at the

stage of “it’s good to be here – it’s good to be anywhere”. But it

is tough out there. Against a background of industrial unrest

(even the Gardaí are protesting!), we shouldn’t be surprised if consumers are on something of a ‘go slow’ themselves.

But it won’t last. It’s too early for green shoots, but as time goes

by people will want to buy: especially those still in secure jobs

who are faced with extraordinary bargains in shops, hotels and

car showrooms. Irish consumers don’t really do hair shirts.

When we have money we can afford to spend then we’re usually

inclined to spend it: assuming we’re getting good value and not being ripped off.

Don’t forget: for every person in Ireland with a mortgage,

loan or ‘maxed out’ credit card there is another person

without any debt (at all). What are you doing to tap the

‘worried well’ market?

Before you embark on a new brand or

business just remember Seth Godin’s

three things you need read more

With the world all ‘a-twitter’ don’t forget

the future is on the TV read more

Business is about passion: so for that matter is

the economy – check out some wise words on the

role of passion in success read more

How not to do food marketing: quite possibly the

worst food in the world read more

30End of the Affair

Register for our free fortnightly eletterconsumerforesight at: www.amarach.com

Read our daily blog:www.amarachresearch.blogspot.com

the future is on the TV read more

It’s all down to psychology – an Amárach

presentation on how Irish consumers will lead us to recovery read more

worst food in the world read more

Optimistic people are healthy and happy – even

when the economy is collapsing around them: what are you doing for optimism? read more

Amárach Research will present a paper on ‘Life Online 2009’ at Comreg’s ICT Research conference on 12th

The Debt Of The Nation

Business

Transcript of The Debt Of The Nation