Cost-of-living crisis 'more devastating' than last financial crash

The surge in the price of the weekly shop has consumers feeling the pressure heading into new year, economist Austin Hughes said, “never mind the extra little bits at Christmas”. File photo 

Irish households have experienced a “very sudden change” in their ability to afford everyday essentials that has been “more abrupt, more devastating” than the last financial crash.

The surge in the price of the weekly shop has consumers feeling the pressure heading into new year, economist Austin Hughes said, “never mind the extra little bits at Christmas”.

"If your energy bill is up over 50%, and the cost of food is up 10%, and then it comes to December you discover the cost of the turkey is an awful lot more this year, it comes home in that sense,” Mr Hughes said.

The latest Credit Union Consumer Sentiment Index suggests that the Irish consumer remains nervous about the road ahead, but is not “completely negative” about their prospects due to the likes of fuel prices easing and reduced job concerns.

Mr Hughes, who is the former chief economist of KBC, said that the sentiment index actually increased in December, compared to November, and is just the fourth increase in the last 12 months.

"Through the year, there was the sense that this was going to be dire,” he said. “And of course it is very tough, the index is picking that up. But it’s probably not as horrendous or as apocalyptic as we might have feared.

“But even with a small chink of light in a tunnel, it doesn’t mean you’re not in a tunnel.” As 2022 draws to a close, it sees inflation at a sustained high level. Since June, the Central Statistics Office’s Consumer Price Index has remained above 8% which is the highest rate since the mid-1980s.

Inflation peaked at 9.2% in October, dropping to 8.9% last month. Experts predict it may remain above 7% next year as households reel from continued rises in the cost of energy, housing and food.

He said: “It should be emphasised that this does not mean that the current conditions faced by Irish consumers are worse than those experienced during the financial crisis.

“But it does suggest the substantial drop in spending power wreaked by the cost-of-living crisis has prompted a sharper and more negative change in the circumstances of more households in the past 12 months than was seen previously.

“Consumers didn’t see the same immediate change they’re seeing now.”