As the table above illustrates, there have been marked and contrasting changes in the financial wellbeing of many Irish consumers in the past year. These survey findings suggest we increasingly have a two-track economy in terms of the financial well-being of Irish consumers.
In the past year, there were significant increases at both ends of the spectrum-in the number of Irish consumers coping reasonably comfortably with their financial circumstances, but also in the number of financially stretched consumers who have reached the point where they would be entirely unable to manage a further financial mishap.
On the positive side, there has been a clear increase in the proportion of consumers capable of dealing with a financial emergency with comparative ease. The most common response given by some 44% of consumers was that would handle such an emergency by drawing on their savings.
As 34% of consumers indicated they would draw on savings when asked the same question in the 2022 survey, this suggests a significant build-up in ‘precautionary savings by Irish households of late. This seems consistent with responses given to a special question in the February 2023 sentiment survey indicating that some 25% of consumers had built up a ‘war-chest’ of savings for emergency purposes since the pandemic. It would not be surprising if some elements of these savings were initially intended for other purposes but have been re-allocated to ‘rainy day’ funds given notably increased financial uncertainty in the wake of the war in Ukraine.
The resilience of the Irish economy through the past year has also seen a slight increase in the number of consumers able to deal with a financial emergency costing €1,000 from their current income to 14% of those in surveyed in 2023 from 12% a year ago. It might also be suggested that this financial wherewithal would probably allow these consumers undertake a significant step-up in spending if or when current uncertainties fade.
The April 2023 survey saw small declines in the number of Irish consumers who said they would handle a financial emergency by borrowing from various sources and in those who said they would sell something. In part, this may reflect improved income or savings meaning there is no need to borrow. However, it could also be inferred, from the overall tone of responses, that, to a broadly similar extent, declines in ‘borrowing/selling’ responses might be because these avenues have been fully exhausted by some consumers.
Arguably, the most notable aspect of these responses is the sharp increase- to 17% this year from 7% in 2022-in the number of consumers who say they couldn’t handle such an expense through any funds or financial capacity available to them at present. An increase of this magnitude in strained responses from Irish consumers appears entirely consistent with the substantial drain on household financial resources from the surge in living costs seen through the past year.
This content was originally published here.