Irish consumers growing concerned over energy prices

KBC Bank Ireland’s monthly sentiment index says 42% of households feel their personal living costs have risen by 5%

Energy costs are beginning to hit consumers. File picture

Irish households are becoming increasingly concerned about rising energy prices, a survey has shown, with many seeing the trend as the main driver behind their rising cost of living.

Oil prices cooled yesterday, but have surged 65% this year to hit multi-year highs of around $85 per barrel, with some expecting prices to return to $100 a barrel.

Overall, Irish consumer confidence has remained steady this month, according to KBC Bank Ireland’s monthly sentiment index. However, that is largely down to an overall feeling of satisfaction in terms of how the broader economy is coping coming out of the Covid crisis.

Personal living costs

On a micro level, households are more concerned, with 42% feeling their personal living costs have risen by 5%, or more, over the past year, according to the KBC report. While price rises for items such as hospitality and clothing have risen, the sharp increase in energy costs – especially coming into the autumn and winter months – is the real driver of concern.

“While the October reading is broadly encouraging and suggests Irish consumer sentiment is reasonably healthy at present, the dominant mood appears to be one of continuing caution born out of uncertainty and experience rather than runaway confidence that would reflect a view that the worst is behind us,” said Austin Hughes, chief economist at KBC Bank Ireland.

Mr Hughes said there is a suggestion of some element of “disconnect” between a booming Irish economy and a bothered Irish consumer at present.

KBC still expects consumer spending levels to rise strongly both this year and next. However, it sees this as more of a recovery than a boom, with levels still likely to be below pre-pandemic 2019 levels.

Global supply crunch

Dented spending power and planning is a result of the rising cost of living, but also pre-Budget worries and difficulties accessing certain products due to the ongoing global supply chain crunch.

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Some of the world's biggest consumer brands are now passing on higher prices to consumers and are warning any policymakers sitting on the inflationary fence that things are going to get worse.

"We expect inflation to be higher next year than this year," said Graeme Pitkethly, finance chief at Unilever, which says its products, from Dove soap to Ben & Jerry's ice cream to Persil washing powder, are used by 2.5 billion people every day.

Earlier this week, the world's biggest food maker, Nestle said it would increase the prices of its products, which include Nescafe and Purina pet food, further in 2021 and then again in 2022 as raw material costs carry on climbing.

The view from the boardroom contrasts with a more ambivalent tone among finance ministers and central bank governors faced with trying to work out when to start withdrawing monetary and fiscal stimulus without choking off the economic recovery.