Irish consumers want Budget 2023 to ease utility bills amid cost of living crisis

KBC survey says sentiment is little changed but that consumers hope next month's budget will help ease soaring costs

Many Irish economists have predicted that consumer price inflation here will peak at around 10%.

Consumers are nervous about paying their utility bills this winter, but are looking to the budget next month to ease the pain of soaring gas, electricity, and driving costs, Ireland’s leading sentiment survey has found.

The KBC Bank survey reported little change in consumer sentiment in July from June, despite the continuing flow of gloomy cost-of-living news, but the latest reading is nonetheless stuck at a late 2020 level, when households and businesses were still subject to strict Covid-19 restrictions.

“There is a sense that consumers are bracing themselves for bad news to come, but not quite sure how bad things might be and how much of an offset they might get,” said economist Austin Hughes, co-author of the survey.

“They can’t know how bad the pressure on utility bills might be and how good the [budget] policy response might be, so there is a sense of nervousness but we are not seeing a dramatic change,” Mr Hughes said, although the good weather had possibly buoyed sentiment somewhat.

It comes as new British figures on Wednesday showed consumer price inflation rose to 10.1% in July, leading to a grim warning from leading US bank Citi that cost pressures could get much worse there.

British consumer price inflation is likely to peak at an annual rate above 15% in the first three months of next year unless there are UK government measures to lower prices, Citi forecast. In Ireland, consumer price inflation was running at 9.1% in July, according of Central Statistics Office figures released last week.

Economist Austin Hughes: There is a sense that consumers are bracing themselves for bad news to come. File picture: Iain White

Many Irish economists have predicted that consumer price inflation here will peak at around 10%, and then ease somewhat, but stay at historically-elevated levels through 2023.

Kieran McQuinn at the Economic and Social Research Institute (ESRI) said the evidence pointed to British inflation running hotter than elsewhere because Brexit was adding to British company costs and their supply chains.

Professor McQuinn told the Irish Examiner that Irish and eurozone-wide consumer price inflation was not necessarily heading higher in line with Britain, and the ESRI was likely to stick to its forecast that Irish inflation would peak at around the current rate of 9%, he said.

The latest reading from the KBC survey is well below the long-term series average, but some way above the low-point of recent years of 42.6 at the onset of the pandemic in early 2020. Irish consumer sentiment hit an all-time low in July 2008, at the start of the banking and property crash.

The report showed 19% of consumers said they were concerned about increased borrowing costs for their mortgages once their fixed term rate expires, and 16% of the respondents said they felt higher European Central Bank interest rates will reduce their chances of purchasing a home.

However, 80% of the survey cited specific ways in which higher interest rates would hit them, although one in six consumers said they felt that further increases in interest rates wouldn’t affect them at all.