Most Irish consumers have made multiple cutbacks with further spending curbs planned

Three out of four consumers say they have had to cut back on necessities

Only one in 14 of consumers say they have sufficient funds and don’t need to make cutbacks, finds Credit Union Consumer Sentiment Survey for October. Here, economist Austin Hughes analyses the findings on behalf of the Irish league of Credit Unions

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The Credit Union Consumer Sentiment Index for October contained a special question focussed on the extent of spending cutbacks being undertaken by Irish households.

The responses to this special question given in the table below suggest that cutting back is now a key feature of Irish consumer behaviour and this will continue apace in the year ahead.  Only 7% of consumers say they haven’t needed to make cutback while three out of four consumers say they have had to cut back on necessities.

All demographics reported widespread cutbacks but there were slightly more respondents reporting adequate funds to sustain spending among wealthier and older consumers (55+). These groups were also slightly more likely to report only cutting discretionary spend. However, it should be emphasised that all demographics tended to show broadly similar response patterns.

It is not all that surprising that the most commonly cited cutback relates to ‘socialising’. In the main, this is a flexible area of spending. However, with as many as one in two consumers pulling back, it won’t help the mood of consumers and it will put further strains on the viability of many cafes, bars, restaurants and other domestic-focused parts of the hospitality sector. Wealthier and Dublin-based consumers tended to show less widespread cutbacks in this area than other groupings. With 2 in 5 consumers also saying they were cutting back on holiday spend, problems for many businesses in this sector of the economy seem set to remain intense in 2023

With surging energy prices central to current cost of living pressures, the fact that 2 in 5 consumers are making cutbacks in this area implies many colder, darker homes this winter. Less affluent consumers and those outside Dublin were more likely to report energy-related cutbacks. Perhaps surprisingly, those aged over 65 were also slightly less likely to report cutbacks in this area. This result could owe something to Government support and/or pre-existing constraints on spending in this area by older households. As the survey was taken after Budget’23 measures were announced, the fact that slightly more consumers say they will make cutbacks in this area in the next twelve months emphasises the intensity of the pressures in this area.

A sense of the scale of current difficulties is also evident from the finding that as many as 1 in 3 consumers are making cut-backs in their grocery spend. In the same vein, a problematic 6% say they were unable to make cutbacks as their spending was already at a minimum. A similar number see next year’s outgoings similarly compromised.

In terms of the Christmas retail outlook, a substantial 1 in 3 consumers are cutting back on gift-buying, with responses suggesting the retrenchment is likely to intensify rather than ease as we move forward. It is notable that cutbacks to child-related spending are markedly less widespread than in most other areas. In part, this may reflect relatively little spend in this area for some consumers but even in those age-groups typically parenting young children cutbacks were materially less pronounced than in other categories.

1 in 3 consumers are postponing ‘big ticket’ purchases such as cars, furniture, or electrical appliances while broadly similar numbers are cutting back on spending on repairs and maintenance. This implies some increased risk of equipment failure that could result in increased financial pressures to replace problem goods as well as some element of safety risks.

In summary, these survey responses suggest that many consumers are undertaking major adjustments in their spending. Despite significant support measures in Budget ’23, consumers see another twelve months of widespread cutbacks ahead of them. In that regard, these results suggest that Budget support measures could have been slightly larger in scale.

The widespread nature of these cutbacks suggests consumers are experiencing a sea-change in their economic and financial circumstances at present. In turn, this explains the historically low Credit Union consumer sentiment readings at present. It also emphasises the extent to which Irish consumer spending may be constrained through the coming year.

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