Household spending will soar to record €100bn as economy surges and wages rise - Ibec
HOUSEHOLD spending is set to top €100bn this year for the first time as a resurgent economy fattens workers’ wallets, business group Ibec has predicted.
And we’re splashing out more on restaurants and entertainment as wages rise and more people join the workforce.
Ibec, headed by chief executive Danny McCoy, has predicted household spending will rise more than 4pc this year, putting it on target to breach the historic €100bn mark.
But it said the percentage of household spending on retail-related goods had already fallen below 40pc in recent years, compared to almost 60pc in the mid-90s. Ibec noted that spending on housing, restaurants, entertainment and healthcare have taken up a greater proportion of household spending.
“In part, this is a trend witnessed in all economies as they get richer and people spend less of their income on groceries,” it said.
That decline in grocery spending as a percentage of overall household expenditure is also likely due to a more competitive grocery retail environment, as chains such as discounters Lidl and Aldi have helped push down grocery prices since they arrived in Ireland almost 20 years ago.
In the year to February, the volume of retail sales rose 6.3pc, excluding motor vehicles, according to the CSO.
In its latest quarterly economic outlook published today, Ibec has predicted the economy will grow 5.6pc in 2018, with the number of people in jobs set to reach a record 2.2 million this year.
However, it warned that potential erosion of Ireland’s competitiveness is an issue.
The number of workers effectively puts the country at full employment. The Central Statistics Office put the seasonally adjusted unemployment rate at 6.1pc in March.
Ibec’s predictions in relation to household spending are also borne out by other figures released this morning by Bank of Ireland and the Economic and Social Research Institute.
Their savings and investment index slipped last month as people are starting to spend more rather than save for a rainy day.
“There could a couple of different catalysts behind this,” said Tom McCabe of Bank of Ireland Investment Markets.
“Younger people may be now more inclined to spend as the economy continues to improve and March’s adverse weather could also have reinforced that shift towards spending,” he added.
Those under the age of 50 have become less inclined to save, the figures showed, but even those over that age are more circumspect now about the savings environment.
“Greater numbers of over fifties are increasingly expressing the view that now is a bad time to save,” said Mr McCabe.
“This group is more likely to have lump sums available for saving.
“Here perhaps people are growing tired of the low interest rates on offer for savings and are now looking for alternative investment options with the potential for higher returns,” he added.