Cost-of-living concerns among Irish consumers are gradually easing, according to the latest monthly reading of Irish consumers. The Credit Union Consumer Sentiment Survey for July reveals mixed news for households, with pressures fading but still lingering. Irish consumers are feeling less confident about their household finances based on recent experiences, and they are also lacking confidence about the coming months. Economist Austin Hughes, who writes the report, suggests that holiday spending plans and the cost of package holidays may be weighing on consumer sentiment. The average cost of package holidays has risen by almost 44% from last summer, airfares have increased by 34%, and the cost of hotels and holiday accommodation at home has risen by 13%. These increases could significantly impact the holiday spending power of Irish consumers and adversely affect their assessment of their own financial circumstances.
Cost-of-living pressures are the critical driver of how consumers are feeling and their current spending power, according to Mr Hughes. Although the headline rate of inflation fell back to just over 6% last month, price increases have been running above the 5% rate for almost two years. The European Central Bank predicts that inflation could become a persistent feature within the economy, raising fears that sharp increases in the price of goods and services could become a normal part of daily life. The survey reveals that many Irish households predict that inflation will remain at a similar rate or decrease slightly over the year. Younger people are more likely to predict lower rates of inflation in the coming year than older consumers, while those who struggle to make ends meet are most concerned about rising prices and predict that high levels of inflation will persist.
Consumers cited energy prices, food costs, and mortgage and rental costs as the items they are most worried about. Mr Hughes emphasizes that housing costs are becoming a critical element for consumers. While grocery prices have been the focus of attention over the past year, it may be surprising that similar numbers of Irish consumers see food and housing costs as the key drivers of inflation over the next 12 months. Mr Hughes explains that food accounts for 9.4% of total spending by Irish consumers, and food prices have risen by over 10% since last summer. On the other hand, mortgage interest costs account for over 11% of consumer spending, and these costs have increased by 17.4% over the same period.
The latest survey shows a modest improvement in how people perceive the country’s direction. However, households are more cautious about the outlook for jobs, according to Mr Hughes.