Growth in disposable income 'wiped out' by inflation

Wages grew by 6% during July and September compared to the same period in 2022 but annual inflation was running at over 7%. 

Household disposable income was “largely flat” between July and September last year with wage growth failing to keep up with inflation as the savings rate also declined, new data from the Central Statistics Office shows.

According to the latest institutional sector accounts, during those three months, overall household income, which is driven by wages, was €32bn during the July to September period which was 6% higher than the same period in 2022.

While household disposable income increased to €38.8bn from €36.4bn during that time, with annual inflation running at 7.1%, any increase was “wiped out” during the quarter, according to the CSO.

As well as higher prices, there were also slightly higher volumes of consumption, up 0.6%, in the quarter mainly due to tourism and travel. Departures from the country were up 12% compared to the same point in 2022.

The total value of goods and services consumed by households and the Government came to €50bn, an increase of €4bn on the year.

The household savings rate during those three months was down to 10.08% compared to just over 11% recorded the previous quarter. Households used their savings to purchase assets, mainly new homes, with capital spending coming to €2.3bn.

Peter Culhane, statistician with the CSO, said average wages are rising but not as fast as inflation, and even though there are more people in work, total disposable income is “largely flat once we adjust for price changes”.

“Inflation led to more household spending, but there was also a slightly greater volume of consumption of goods and services in the quarter.” 

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The gross value added by non-financial corporations, which drives the country’s gross domestic product, was €97.3bn during the quarter down €6.6bn compared to the same period in 2022.

This was mainly due to reduced contract manufacturing by multinationals. Overall GDP was lower, due largely to a reduction in the foreign-dominated manufacturing sector.

GDP between July and September was €128bn compared to €134bn during the same period in 2022.

The government surplus for the quarter was €821m, less than half what it was in the same period in 2022, an effect of volatile corporation tax receipts.