Household saving rates drop to 14% as disposable incomes shrink
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Household saving rates dropped to 14% in the first quarter of 2023, as high rates that have prevailed since the start of the pandemic were impacted by shrinking disposable incomes.
Figures released by the CSO on Thursday show that household saving has almost halved in the first three months of this year, dropping from a rate of 24% at the end of 2022 to 14% by the end of March 2023.
The lower rate of saving in the first quarter of this year marks a departure from the high rate of over 20% that has prevailed since the pandemic.
Peter Culhane, Statistician in the National Accounts Analysis & Globalisation Division of the CSO, said that the 14% saving rate is similar to that seen in 2019, and is “a return to a more typical ratio of saving to spending for Irish households”.
The CSO notes that savings declined last quarter as disposable incomes shrank, and household consumption grew.
Total Disposable Income (TDI) of households was down 11% in the first quarter of 2023 when adjusted for inflation and seasonal factors. However, even taking inflation into account, it is still 2% higher than pre-pandemic levels of the last quarter of 2019 and 15% higher than the 2008 peak.
Compensation for employees in most sectors grew last quarter, owing to a combination of higher average weekly pay and more people in work - but those working in Public Administration, Education and Health saw a decrease from unusually high compensation at the end of last year, when back-dated payments under the Building Momentum agreement were received.
Household consumption rose in the first quarter of 2023 largely due to higher prices, as the Consumer Price Index showed a three-month rise of 1.9% during the quarter.
The cost of Housing, Water, Electricity, Gas & Other Fuels were major contributors to the overall increase in the cost of living, and Hotels & Restaurants and Food & Non-Alcoholic Beverages were also significantly more expensive in the quarter.
Despite rising prices, there was also a higher volume of goods and services bought in the first quarter of 2023, impacting household saving rates.
The Retail Sales Index shows highest volume increases in Textiles, Clothing & Footwear and Furniture & Lighting, and the Services Index showed growth in Food Service & Accommodation (restaurants and hotels).
Statistician Peter Culhane added that overall household income is still higher than consumption.
“Households are still adding to their considerable deposits, they are just adding to wealth at a slower rate,” he said.
Within the 14% household saving rate in the first quarter of this year, most went into bank deposits and to buying or improving homes, while pension funds, and other investments also absorbed some of the saving accrued.
Collectively, households had €151bn in deposits with Irish banks at the end of March, compared to €110bn at the end of 2019 and €83bn at the end of 2007.
They have €100bn in loans with Irish credit institutions, compared to €87bn at the end of 2019 and €153bn at the end of 2007.