Austin Hughes: Split between consumers who are comfortable and those barely clinging on

Austin Hughes: 'Pressure on family finances is still a major issue for many, if not most, consumers.'

It’s no longer the worst of times but it’s still far from the best of times for Irish consumers: That’s the clear message from the latest Credit Union Consumer Sentiment Survey.

are no longer soaring but neither are they collapsing. The latest official figures show the average price of energy, both motor fuels and light and heating bills, paid by Irish households was 57% higher in February 2024 than three years earlier.

Similarly, official data show food prices up 21% over the past three years and still climbing, albeit at a much slower pace than a year ago. As a result, pressure on family finances is still a major issue for many, if not most, consumers.

To these pressing difficulties, we must add the nervousness and uncertainty prompted by a fragile global economic outlook, that is further threatened by relentless conflict in Ukraine and the Middle East, as well as the possibility of significant policy shifts after looming elections here and elsewhere.

For these reasons, it’s not surprising an improvement in Irish consumer confidence over the turn of the year has stalled of late. A gradual but uneven fading of negative factors is not being replaced by clear and strong positive economic and financial developments. 

As a result, there is still a lack of favourable dynamics to move consumer sentiment from the entrenched ‘feel-bad’ of recent years to a broadly based ‘feel-good’.

Recent forecasts from both the Central Bank and the Economic and Social Research Institute seem reasonable in predicting that, on average, the living standards of Irish consumers will improve in the coming year. 

However, the shadow of the financial crisis still hangs heavy in the thinking of many Irish consumers and the sequence of adverse shocks in recent years ranging from Brexit, through covid, to a cost-of-living crisis may have reinforced a reluctance to splash the cash until consumers are sure they have the cash to spend and will continue to do so.

If recent Irish consumer sentiment readings suggest a subdued picture, they should not be seen as signalling a slump. Spending power and overall consumer spending are set to rise this year but the picture for individual households and for the particular businesses that rely on them is likely to vary widely.

The latest retail and car sales figures suggest a surge in new car sales and strong growth in spending on electronics of late, but data for the three months from December to February also show sharp year-on-year declines in spend at department stores, hardware shops, book shops and newsagents.

In part, this is down to shifting patterns in the type and timing of purchases as well as in tastes, but it is also indicative of major differences in financial circumstances across the spectrum of Irish consumers. 

These differences are clear in the divergent nature of answers given to a special question in the March Credit Union Consumer Sentiment Survey, which was conducted with Core Research.

Irish consumers were asked about their current and planned spend on home improvements. About two out of three Irish consumers said they undertook some form of spending on home improvements in the past two years. 

Of the consumers undertaking home improvements, almost half said they were funding this spend from their savings, while roughly one in four consumers said it was being financed from their current incomes.

Although two thirds of Irish consumers say they are spending on home improvements, 30% say they are not spending any money in this area. 

For some, this is because of the type of accommodation they live in while others might not feel any spend is needed. 

However, the strong likelihood is that many households are not spending because they cannot afford to. This chimes with a recent Central Statistics Office survey that found, when account is taken of inflation, some 13.6% of Irish people were at risk of poverty in 2023.

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While the picture painted by Irish consumer sentiment survey is one of a cautious consumer at present, arguably a more important message is a tale of three consumers. 

There appears to be a clear split in current conditions where many Irish consumers are comfortable, most are coping, but significant numbers are barely clinging on.