Six in 10 people say they have less money to spend on the festive season than they did in 2021, but Christmas is likely to be “careful rather than cancelled”, the latest Credit Union consumer sentiment index suggests.
Consumer confidence dropped slightly in November following a “small uplift” the previous month, as a flurry of job losses in the technology sector cancelled out the positive impact of financial supports in Budget 2023. Consumers are “nervous but not despondent”, said economist Austin Hughes, who analysed the findings on behalf of the Irish League of Credit Unions (Ilcu).
The November index reading of 45.3, down from 46.1 in October, remains above the 14-month low of 42.1 recorded in September – an “encouraging” result that points to a slowdown rather than a slump in spending, he said.
“Reasonable if restrained” outlays this Christmas are now likely, given that just 5 per cent of consumers say they have more spending power than last year, while 61 per cent say they have less money to spend.
Some 62 per cent of consumers surveyed said they would spend less on gifts this year, while 61 per cent said they would spend less on entertainment. Only 23 per cent said they planned to spend more on gifts and 24 per cent said they would spend more on entertainment.
About one in two consumers said their “extra seasonal spend” will be funded from household income, while 33 per cent said they will use savings. Some 6 per cent said they intend to borrow money to fund their Christmas, while 11 per cent said they didn’t know how they will pay for it.
“Don’t know” responses were much more frequent among lower-income households and those who said they were struggling to make ends meet, as well as among people aged below 45, whereas people aged 45-54 were most likely to signal they would borrow.
The responses were made in the context of planned spending cutbacks, suggesting that significant numbers will struggle to finance even a “cutback Christmas” in 2022, Mr Hughes said.
Household spending plans weakened this month as consumers continued to adjust their outlays “in the face of an increasingly uncertain environment”. The pullback appeared to owe more to rising levels of caution than growing cash constraints. But with Irish inflation likely to come in at about 8 per cent in 2022, up from 2.4 per cent in 2021, scope for discretionary spending could be much reduced.
“On my rough calculations, higher inflation translates into a hit of about €3,000 to the average household’s buying power this year,” Mr Hughes said. “Given that the approach of winter means much higher outlays on hugely more expensive heat and light as well as notably dearer grocery bills, the sense of ‘feel poor’ is likely to be pronounced this Christmas.
“In these circumstances, it is scarcely surprising that most Irish consumers say they will have less to spend this Christmas than last.”
However, the index did find that consumers were a little less negative than before about their own current financial circumstances, while the outlook for their future finances was unchanged. And with more people at work than a year ago and Government financial supports reaching most households, overall levels of consumer spending should remain “reasonably healthy”, Mr Hughes added.
The survey of a nationally representative sample of 1,000 adults, conducted by Core Research on behalf of Ilcu, took place during November 3rd-15th.
Irish consumers were also slightly less negative about the economic outlook in November than they were in October, though they remain “very downbeat” about the broad economic environment. They have also become “notably more worried” about job prospects, with a “significant downgrade” in the employment outlook attributable to lay-off announcements at tech companies including Meta, Twitter and Stripe, raising wider concerns about the outlook for the tech sector as a whole.
Employment fears are not anywhere near as large as they were during the financial crisis, nor are they as pronounced as those seen in the wake of Covid-related lockdowns in 2020, Mr Hughes noted. They are instead much closer in scale to those seen around the time of the dotcom collapse in the early Noughties, when the jobless rate was similarly about 4 per cent.
“The broader health of the Irish jobs market in recent years, coupled with widespread reports of significant unfilled vacancies and skill shortages in tech-related areas, appears to be producing a more measured if still material immediate reaction to the spate of job losses seen during the November survey period.”
