Households in the Republic are continuing to save at twice the rate they did before the pandemic, putting aside €1 for every €4 they spend.
New figures from the Central Statistics Office (CSO) show that households saved €3.9 billion, or 20 per cent of disposable income, in the final three months of last year. Before the pandemic, households saved on average 10 per cent of their disposable income, with consumer spending making up the other 90 per cent.
Disposable income is the income remaining after deducting tax and social insurance that is available to be spent or saved.
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The Covid crisis triggered a surge in savings, with households placing an additional €16 billion on deposit up to May of last year. Experts expected households to run down their savings in the post-pandemic period and as a result of the current price squeeze but this has not happened.
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“Irish households built up a lot of savings over Covid-19 and they are not winding them down. The saving rate was 20 per cent in October, November, and December (Q4) of 2022,” Peter Culhane of the CSO said.
“This means that far from making up for missed opportunities to spend, households are now saving more than they did before the pandemic,” he said, noting that over the past seven quarters the savings rate had been about 20 per cent.
In its report, the CSO said the total disposable income of households in real terms was largely unchanged in the fourth quarter of last year as inflation eroded higher income from employment and social protection.
“We can see from other CSO data that the wage bill is increasing because pay rates are going up and there are more people in employment than ever before. Households also received additional supports from Government in response to inflation,” Mr Culhane said.
“However, when we take inflation into account, household income was really only standing still. Consumer prices rose as fast as incomes so real [constant prices] total disposable income was largely unchanged over the third quarter in 2022,” he added.
The CSO said consumption rose in October-December period and not just because of higher prices or seasonal factors.
“A slightly greater volume of goods (seasonally adjusted and price adjusted) and services were bought in the period, and our surveys of retail and other services show volume growth in bars and restaurants in the last quarter of 2022,” Mr Culhane said, while noting consumer spending was still below its 2019 level.
“While costs increased due to high inflation, household incomes kept pace in the quarter, and households slowly increased their post-pandemic spending while maintaining a high level of saving,” he said.
[ Some 80% of consumers have changed non-essential spending habitsOpens in new window ]
While many people are nervous about spending money and saving at unusually high levels, many others are barely managing to get by according to separate research released at a Love Irish Food webinar. Addressing the online seminar, Kantar managing director David Berry said 23 per cent of consumers were struggling, with many switching to the cheapest own-brand alternatives to popular brands.
Grocery price inflation reached a record high of 16.4 per cent in the 12 weeks to the middle of last month, with the grocery market seeing much stronger own-label growth (up almost 12 per cent) compared with brands (up just over 6 per cent) as shoppers looked for ways to save money.
Own-label value share has also risen, from 42.6 per cent in 2021 to 45 per cent in 2023. Value own-label lines (the cheapest products) saw the strongest growth year on year, up 35.8 per cent, with shoppers spending €19 million more on these ranges.
The webinar also heard that Irish brand share of sales across the top 100 grocery brands had dropped only slightly, by 1 per cent with 44 of the top 100 selling grocery brands in Ireland during 2022 produced in Ireland. Over the past year, the combined sales of these 44 brands have reached a total of €1.09 billion. This is a 24 per cent jump in just five years since 2017.
“It is concerning to see consumers struggling as grocery prices increase but it is promising to see people continuing to buy Irish-produced food brands as part of the weekly shop,” said Kieran Rumley, executive director at Love Irish Food.
“Despite the pressure on households’ spend, brands still dominate the share of the grocery basket in Irish households. Buying more Irish-made products helps Irish businesses survive and protects Irish jobs, which is critical in the current climate and will be crucial in food security and driving economic recovery.”
