Charlie Weston: Consumer mood has not improved
THE mood of consumers has not improved, despite new reports of a boom.
Households ended last year saying they are not feeling any uplift in their incomes, even though employers’ body Ibec claims households have never been better off.
The KBC Bank/ESRI shows consumer confidence effectively unchanged in December.
The consumer sentiment index fell slightly to 103.2 in December, down from 103.6 the previous month.
An analysis of the figures by KBC Bank economist Austin Hughes shows that the booming economy contrasts with limited gains in average living standards.
He said most consumers were aware that national economic figures were showing an improvement, but they were only seeing limited improvements in their personal financial situation.
“For most consumers, reports of a return to boom-time conditions seem very remote from their own experience,” Mr Hughes said.
The flat consumer confidence figures come a day after Ibec said households have never been better off and now have a combined €4bn more in savings than they owe in debts.
Ibec researchers also believe disposable income is now likely to have surpassed boom-time levels.
The total amount of loans owned by Irish households has fallen by €60bn since the start of the crash, thanks to debt repayments, write-offs and the slowdown in the new mortgage market.
While many families that want to borrow to buy a home are struggling to get a mortgage, it means that the average level of indebtedness has fallen sharply, Ibec said.
It said wages had been the key driver of household recovery.
But the consumer sentiment survey found that income growth remained constrained, while households worried about Christmas-related spending.
And people do not expected any clear improvement in their living standards this coming year.
Mr Hughes said the December sentiment survey suggests that the average Irish consumer is seeing a good rather than a great economic recovery.
“The details highlight significant optimism about the outlook for activity and employment in the Irish economy, but strike a more cautious note in relation to expectations for personal finances,” he said.
He said the slight downgrading of the outlook for household finances in the December survey likely reflects increased spending demands ahead of Christmas.
It might also owe something to concerns about the need for larger longer-term financial nest-eggs. These fears were prompted by news in the last while that the compulsory retirement age will rise for public servants.
“We would expect some uptick in sentiment in January on bargain hunting in post-Christmas sales and a measure of New Year optimism,” he said.
Meanwhile, Social Justice Ireland said that the economy may be doing well, but it is crucial that policy-makers realise that many on lower incomes are not benefitting as they should.
Some 790,000 people in Ireland are living in poverty, the think tank said.
A quarter of a million of these are children. One million people in Ireland are experiencing deprivation, director of Social Justice Ireland Dr Seán Healy said.
"Despite an increase in average incomes and other signs of economic recovery, these figures show that a significant proportion of the population is still living in very difficult circumstances. These figures are unacceptable in a rich, developed country like Ireland,” he said.