Households reducing and using savings 'as inflation concerns likely to persist'
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Households are changing their attitudes to savings as the cost-of-living crisis bites, and saving levels are falling back rapidly from their elevated levels during the pandemic, a Bank of Ireland (BOI) survey suggests.
The quarterly survey appears to confirm official figures that the households who were able to build up significant levels of savings during the covid years are now, for one reason or another, eating into their savings.
Surveys such as the Bank of Ireland index — which is based on a poll of 1,000 people in the Republic — are closely watched, because the unwinding of the record level of savings is helping to buoy consumption at a time of uncertainty amid the spike in consumer prices, rising interest rates, and the potential slowdown in parts of the multinational economy that Ireland had long relied on to bolster economic growth.
The Economic and Social Research Institute (ESRI) said earlier this week that consumption will in part help to drive economic expansion this year and in 2024.
The BOI survey found that the easing in the annual rate of inflation has failed to allay concerns, and cost-of-living issues are likely to remain the single largest concerns of Irish households for some time. Households are also worrying about the cost of housing and rents, possibly because of the hike in interest rates, the survey suggests.
"2023 has seen a considerable shift in attitudes to saving," said BOI chief investment strategist Kevin Quinn. "But this year, as the cost of living has become such a challenge for many households, savings levels have begun to revert to pre-pandemic norms.”