Holiday and housing costs weighing on Irish consumer sentiment, says Hughes

Economist Austin Hughes, author of the Credit Union Consumer Sentiment Survey for July, said that despite a calming of inflation, said that the cost of package holidays may be adversely affecting consumers' outlook at present.

Consumers cited energy prices, food costs, and mortgage and rental costs as the items they worried about the most. 

Cost-of-living fears plaguing Irish consumers are gradually easing, but any full recovery still has some way to run, with holiday costs currently worrying many households, the latest monthly reading of Irish consumers suggests. 

The Credit Union Consumer Sentiment Survey for July has mixed news for households, with the pressures facing Irish consumers fading but far from over. 

Irish consumers feel less confident about their household finances this month, based on their recent experiences, and are also not at all confident about the coming months.

Economist Austin Hughes, who writes the report, said holiday spending plans and the cost of package holidays may be weighing on consumer sentiment. The average cost of package holidays has soared by almost 44% from last summer, the cost of airfares has increased by 34%, and the cost of hotels and holiday accommodation at home has risen by 13%.

“Increases of this magnitude would undoubtedly put a significant hole in the holiday spending power of Irish consumers and could have adversely affected their assessment of their own financial circumstances,” said Mr Hughes.

He said that cost-of-living pressures are the “critical driver” of how consumers are feeling and their spending power at present. 

The headline rate of inflation fell back to just over 6% last month, but price increases have been running above the 5% rate for almost two years. 

Mr Hughes also highlighted predictions from the European Central Bank that inflation could become a persistent feature within the economy, raising fears that sharp increases in the price of goods and services could become a normal part of daily experience. 

According to the survey, many Irish households predict that inflation will stay at a similar rate or fall slightly over the year. 

Younger people were more likely to predict lower rates of inflation in the coming year than older consumers, while those who have difficulty in making ends meet are most concerned about rising prices and predict that high levels of inflation will persist, the survey finds.

Consumers cited energy prices, food costs, and mortgage and rental costs as the items they worried about the most. 

Mr Hughes said housing costs are becoming a “critical element” for consumers. 

“In light of the intense focus on grocery prices through the past year, it may seem surprising that broadly similar numbers of Irish consumers see food and housing costs as the key driver of inflation over the next 12 months,” he said. 

Mr Hughes said the explanation may be that food accounts for 9.4% of total spending by Irish consumers, and food prices have risen by over 10% from last summer. However, mortgage interest costs account for over 11% of consumer spending, and such mortgage costs have climbed 17.4% over the same period.

Across the economy, the latest survey showed a modest improvement in the way people feel the country is going. However, households were more cautious about the outlook for jobs, Mr Hughes said.