HOUSE PRICE KEY FACTOR IN SPENDING, FINDS STUDY - Household spending is more affected by house prices and changing debt levels in Ireland than in other countries, according to new research. As a result, large variations in house prices, such as those experienced in the Irish market since the economy collapsed in late 2008, are likely to have a significant impact on the real economy. It also found the decision to reduce household debt levels is found to have negative implications for consumption, writes the Irish Times. In addition, when examining household deleveraging patterns (debt repayment), the analysis suggests it is a relatively affluent cohort of the mortgaged population who are more likely to engage in deleveraging. This suggests certain less-well-off sections of the mortgaged population are likely to remain significantly indebted while unable to address their leveraged position. The research paper, Consumption and the Housing Market: an Irish Perspective, by Kieran McQuinn of the ESRI and Yvonne McCarthy of the Central Bank of Ireland, examines the relationship between the Irish housing market and the real economy. The authors set out to achieve a greater understanding of the links between housing, the real economy and financial sector developments. The paper analyses two unique micro datasets about Irish households with mortgages to estimate the impact changes in housing wealth are having on consumption, and the implications of household indebtedness on consumption.
50% HIKE IN LEVY ON ELECTRICITY BILLS IS A 'SNEAKY TAX' - Householders are to be hit with a massive hike in a state-approved levy on their electricity bills. The 50% rise in the levy used to subsidise energy generated from peat and wind has been condemned as "just another sneaky tax rise", writes the Irish Independent. The move will add €27 a year to the average household bill, and comes after a similar-sized increase in the levy last year. The Public Service Obligation (PSO) levy is being imposed despite a fall in the wholesale cost of generating electricity. Vice-chairman of Consumers' Association Michael Kilcoyne called on Energy Minister Pat Rabbitte to change the rules which result in householders and businesses being forced to subsidise the cost of generating power from wind and peat. "This is just another sneaky tax rise. The regulator, the minister and officials are not in touch with reality if they are imposing such a large increase in the levy." The Commission for Energy Regulation (CER) has issued a "proposed decision" which will lead to the hefty increase in the PSO levy on electricity bills. Even though the decision is a proposed one, experts said it was highly unlikely to change. Householders will be charged €66.55 a year in the PSO levy, up 47%. When valued added tax (VAT) is added the annual cost on each household bills will go to €75.42.
DUNNES' PRICING PROMOS PAY OFF - Dunnes Stores ‘round euro’ pricing promotions helped it to marginally increase its grocery sales in the three months to the end of last month - the only one of the major multiples to do so, says the Irish Examiner. Latest supermarket sector data - from consumer insights agency Kantar World panel - shows that Dunnes’ over-the-counter grocery sales increased by 0.7%, year-on-year, during the 12 weeks to May 25. In comparison, Tesco Ireland saw its sales fall by 4.7% and SuperValu dipped by 0.1%. According to Kantar’s commercial director, David Berry, Dunnes’ strategy of offering ‘round euro’ (prices labelled at €1 or €2 price points) promotional offers is popular. However, Dunnes’ actual share of the Irish grocery market remained flat - at 21.4% - during the period, with Tesco Ireland slipping from 28% to 26.3% year-on-year, and SuperValu going from 25.2% to 24.8%. The German discounters - Aldi and Lidl - had another strong period, however. Lidl hit a record high market share of 7.9%, with Aldi now commanding an 8% share of the market. Additionally, Aldi saw its over-the-counter sales jump by 21.6% during the period, while Lidl enjoyed a 13.2% sales increase.
GORDON BROWN WARNS SCOTLAND COULD BE 'LOST BY MISTAKE' - Gordon Brown has warned the pro-union campaign that its “patronising” arguments risk galvanising the nationalist cause and prompting independence for Scotland “by mistake”. The former Labour prime minister said the repeatedly negative tone of the Better Together campaign was creating a “Britain versus Scotland” debate that could end with an “irreversible” split. “Countries can be lost by mistake,” he said, reports the Financial Times. In his most forceful intervention in the campaign ahead of September’s independence referendum Mr Brown said that while the rise of Ukip had been described as “seismic”, this was nothing compared to the changes afoot in Scotland given its growing powers. The idea of a unitary state was “dead and buried”, he said in a speech to journalists in the House of Commons. “There is more to come if Britain does not wake up, there will be home rule for Scotland within the UK as a minimum,” he said. “We are as close to federalism as you can get where 80% of the population are in one part of the country.” Better Together has over the last year based its campaign for the union to remain intact on warnings about potential disadvantages to Scotland if it votes “Yes” in September. Whitehall has published research papers suggesting damage to Scotland’s social security, pensions system, economy and defence if it broke away from the UK.