Consumer spending this Christmas will likely be up from a year ago but not “spectacularly so”, the latest monthly reading of consumer sentiment suggests.
KBC Bank Ireland and the Economic and Social Research Institute said their survey showing consumer sentiment weakened slightly in October from September reinforces the message of “solid consumer spending rather than a surge”.
Austin Hughes, chief economist at KBC Bank Ireland, said that increased employment will boost spending but modest rises in wages will likely mean individual consumers will spend only slightly more at Christmas.
“As income growth is still modest for most households and significant uncertainty persists about future prospects, it remains the case that caution rather than confidence is the key influence on Irish consumer behaviour at present,” said Austin Hughes, chief economist at KBC Bank.
“As a result, any increase in household spending in the key final months of 2017 is likely to be healthy rather than huge,” Mr Hughes said.
New Central Bank figures also showed a mixed picture of household financial well being: People have more money in their bank accounts but many households are still weighed down by huge amounts of housing debt — the legacy of the property and banking crash.
At €1bn, the bank said household deposits in the second quarter were at their highest level since before the onset of the 2008 crash, while the “net worth” of households boosted by the “substantial” rise in house prices was quickly approaching the Irish pre-crash peak of €719.6bn.
The ability of households to service their debt or “debt sustainability” has improved, according to the Central Bank.
Nonetheless, the scale of the legacy housing debts remains huge. Ireland is the fourth most indebted EU country, behind Denmark, the Netherlands and Sweden, the figures show. The UK is the fifth most indebted.
Other official figures show manufacturing output fell in September from September 2016.
Both the so-called modern sector of multinationals and the traditional sector — which tends to employ large numbers of people in industries such as food and food processing — weakened, according to the CSO figures.
“Output this year looks set to post a single-digit drop in volume terms on 2016. The outlook for production next year remains very uncertain given the whole Brexit-sterling issue.
“At this stage, we would say another single-digit decline is on the cards,” said Alan McQuaid, chief economist at Merrion Capital.
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