Personal savings running at record 11pc high
PERSONAL savings are at an all-time high as anxious consumers squirrel away nearly four times as much money as they did at the height of the boom.
New figures show people put away 11pc of their disposable income in 2009, compared with just 3pc in 2007, while debt levels also fell dramatically.
Householders are now saving twice as much as the average of 5.4pc that they saved throughout the last decade.
And they are also borrowing less, with a 21pc drop in personal debt in the 12 months to November 2009 and repayments on credit cards exceeding new spending.
The figures were presented in the latest Consumer Market Monitor, compiled by UCD Smurfit Graduate Business School and the Marketing Institute of Ireland, based on research by other bodies such as the Central Bank.
The report said that the main reason for the surge in savings is a precautionary move by consumers "in the face of rapidly deteriorating prospects for employment and incomes".
Report author Professor Mary Lambkin of UCD said that the unprecedented level of savings showed how crucial consumer confidence would be to get the economy moving again.
"When people are uncertain and terrified of what's going to happen, that's when they put their money in the shoe box or the bank or whatever.
"In many ways people find uncertainty harder to handle than adversity, yet the Government spent most of last year terrifying people about what might be in the next Budget instead of giving them the confidence to start spending again," she said.
The move to save rather than borrow mirrors trends also being seen in Britain and the US although it is much sharper here.
And the high level of personal saving has led one of the country's leading economists to predict a return to strong growth once consumers finally relax and start spending again.
John Fitzgerald of the Economic and Social Research Institute said consumers have been "scared out of their wits" by the recession but at some stage they will start spending again, albeit probably not until 2012.
Personal spending in Ireland fell from €93.6bn in 2008 to €84.2bn in 2009, and experts have predicted it will drop more slowly this year, falling by 2pc.
But on the up side, consumer sentiment is slightly better than it was a year ago, up 6pc compared with December 2008 when it was on the floor, the monitor shows.
Retailers predict that despite last year's disastrous fall in trade, the worst is over and there could be a return to growth by June.