Irish consumers rein in spending in fear of Omicron and soaring utility bills

Cheer turns to fear as Ireland is haunted by the Covid flare-up of last Christmas, and by ever-higher energy prices in the new year

'An uneven and possibly sluggish or subdued Christmas rather than a slump in spending,' is how KBC Bank describes the sentiment it detects in its latest consumer survey. Picture: Larry Cummins

Memories of the flare-up of Covid last Christmas will likely lead to Irish consumers reining in their spending plans this year in the face of the Omicron variant, a major new survey has found. 

KBC Bank's latest reading of Irish consumers finds that households are facing "seasonal fear rather than cheer" as they contemplate both the risk of the variant and the prospect of paying higher utility bills after Christmas, as inflation hits heating and lighting and other costs this winter.

Consumer sentiment has fallen at its steepest rate since January — and although it is "not in freefall", it points to "an uneven and possibly sluggish or subdued Christmas rather than a slump in spending", according to the survey.  

"Uncertainty around Omicron and memories of virus surge at Christmas 2020 are likely undermining sentiment at present" at a time when colder weather is pushing up winter heating bills, the survey said. 

The reading "signals a clear and material deterioration in the mood of Irish consumers of late but not a complete collapse in confidence," said Austin Hughes, chief economist at the Irish bank. 

The sense that the pandemic and price pressures may prove more persistent and problematic than previously thought and the ghosts of previous spikes in both mean that, unfortunately, the  December sentiment index speaks of seasonal fear rather than seasonal cheer.

One source of cheer for retailers and hospitality businesses is that, compared to other countries, the bruising that Irish consumers have endured is less severe than it has been in Germany.

Nonetheless, consumers were again much more concerned about the outlook for jobs "suggesting growing concerns around viability of particular sectors and hints at need for targeted structural support", the chief economist said. 

The survey adds to the concerns in anecdotal evidence from economists and Irish business groups about consumer spending this Christmas as the Omicron variant flares.  In Britain, the Confederation of British Industry (CBI) said yesterday that Omicron was having "a chilling" effect on retail sales in the first two weeks this month. CBI economist Ben Jones said: 

Our December survey confirms what we've been hearing anecdotally about Omicron's chilling impact on activity on the high street, with retail sales growth slowing and expectations for the coming month sharply downgraded. 

The rapid spread of Omicron that led to the Government again imposing restrictions on pubs and restaurants and closing night clubs shocked hospitality businesses.  

Business group Isme said it had written to Taoiseach Micheál Martin requesting him to oversee what it calls "a more strategic approach" to planning for the pandemic so that vulnerable firms are not caught out again.      

Specifically, Isme chief executive Neil McDonnell said they want the authorities to set out in advance the restrictions businesses will likely face when Covid case numbers jump, because Omicron was unlikely to be the last of the Covid variants.