Consumers set to struggle to finance a 'cut-back Christmas', says new report

Brown Thomas store display on St Patrick's Street, Cork. Picture: David Creedon

Many Irish consumers will struggle to finance a “cut-back Christmas” this year, according to a new report.

The Credit Union Consumer Sentiment Index for November showed one in five will either borrow to fund extra holiday spending or do not know how they will pay for it.

"With Irish inflation likely to be around 8% this year compared to 2.4% in 2021, consumers will find that their scope for discretionary spending at Christmas will be much reduced,” said the report.

Economist Austin Hughes said higher inflation equals a hit of about €3,000 to the average households buying power this year.

Roughly half of Irish consumers in the survey said they will fund Christmas spend from income, while one in three consumers will use savings.

Irish consumer confidence was slightly lower in November than in October, the report found.

Spending on social activities increased in October, despite inflation reaching over 9% for that period.

Total October spending rose by 2% compared to September.

The drop in consumer confidence for November was driven by “rapidly increasing concerns” about job losses in the tech sector and caution around spending amid a cost-of-living crisis, the index found.

In spite of a little less gloom on the broad economic outlook, Irish consumers were notably more worried about job prospects,” said Mr Hughes.

Tech companies including Twitter, Stripe, and Meta announced jobs cuts recently, while businesses across sectors are reporting a skills shortage leading to unfilled roles.

However, employment concerns in Ireland have not yet reached the level recorded during the financial crisis when there was a sharp and sustained fall in numbers at work in the Irish economy.

“If the Credit Union Consumer Sentiment Index reading for November suggests no major spillover from tech job losses to other areas of the confidence survey, it is worth noting that the only other element to weaken this month was household spending plans,” said Mr Hughes.

“This hints that Irish consumers continue to adjust their outlays in the face of an increasingly uncertain environment.”

The index also showed household finances improved marginally, which Mr Hughes said is likely due to measures in the Government's last budget.

The League of Credit Union's Irish Consumer Sentiment Survey is a monthly survey of a nationally representative sample of 1,000 adults.