Fearful households may be killing job creation with caution by scrimping to save rather than spend in the cash-starved economy, according to a director of the body representing the retail sector.
A survey shows 75% of people are saving, putting by an average of almost €250 a month and feeding into a mountain of personal bank deposits which stands at €86.5bn.
With interest rates on savings accounts low and taxes on interest earned high, a fear for the future rather than gains on lump sums is believed to be the main factor behind the savings.
However, retailers warned that the lack of consumer spending had contributed to a 30% decline in retail sales since 2008 and the corresponding loss of more than 50,000 jobs.
Stephen Lynam, director of Retail Ireland, said: “We estimate that the household savings ratio was about 2% during the boom, which was probably imprudent, but it’s 14% now, which is not sustainable if we want to have growth.”
The survey, conducted for EBS, shows savers are putting away an average of €2,931 per year — €244 a month. While those figures are down on 2008, when four in five were saving and putting away €299 per month, they still represent one of the highest levels of saving in Europe.
Aidan Power, EBS head of marketing , said: “We are seeing that Irish people continue to save what they can when they can, with three in four people actively saving. How people save is very important, with those committed to saving regularly saving more than those saving on an ad hoc basis.”
The difference is between €3,850 per year for those who save a set amount each month and €2,370 for those who vary the amounts and frequency. One in three are saving for something particular, such as a holiday, wedding or car.
Coinciding with the tendency to save is a growing concern to shop around, with 93% saying they are looking for better deals due to the recession.
Utility bills are a big target for cost-cutters, with 68% saying they hope to save money on their phone bill, 60% targeting electricity and gas spend, and 51% reviewing television services.
About 59% hope to save on motor insurance, 51% are reviewing household insurance, 67% plan to spend less on clothes and 31% intend cutting their children’s extracurricular activities.
Mr Lynam said such caution would not help the market. “We completely understand why people are cautious but there are consequences of that for the economy. People are saving for a rainy day when it’s already raining.”
He said it was essential the Government moved quickly to restore confidence by getting the referendum on the fiscal compact passed, putting public finances on a stable footing, and pursuing solid job creation policies.
“Ireland is officially out of recession but all the growth is in the export sector. We estimate that consumer spending will fall another 2% this year so that retail sales will have fallen for five years in succession. Until that’s remedied, my members are not going to see any kind of recovery.”
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