Business

Confidence index suggests more are worried about Brexit than rising prices

Danske Bank chief economist Conor Lambe
Danske Bank chief economist Conor Lambe Danske Bank chief economist Conor Lambe

POST-Brexit trading arrangements are keeping people in Northern Ireland awake at night more than worries about the cost of a loaf or fuelling their cars, a survey shows.

Danske Bank's quarterly consumer confidence index points to high inflation weighing heavily on consumer sentiment.

But when asked what had the largest negative impact on their confidence levels, 25 per cent of respondents pointed to the post-Brexit trading arrangements.

Somewhat surprisingly, that's narrowly more than the 24 per cent who cited the impact of spiralling prices on their household finances - and twice as high as those worried about coronavirus restrictions.

The bank's confidence index, a closely watched measure of how people view their personal finances and wider economic prospects, decreased by three percentage points in fourth quarter of 2021 when compared to the previous three months.

But it is well above the reading for the comparable quarter the year before, when the north was bound by much stricter lockdown regulations.

Respondents to December's survey reported feeling less confident about their current finances, future finances, job security and their expected spending on expensive items.

Danske Bank predicts that while annual consumer spending is still expected to rise in 2022 as the recovery from the pandemic continues, high inflation and falling confidence levels could influence the rate of spending growth, with nearly a third of consumers saying they'll reduce their discretionary spend.

Danske Bank chief economist Conor Lambe said: “The rate of inflation in the UK has been on an upward trajectory for a number of months. A year ago the CPI inflation rate was just 0.7 per cent. When this survey was conducted in December it was 5.4 per cent, and it increased again to 5.5 per cent last month.

“The rise in inflation has been brought about by a number of factors including higher energy prices and supply chain disruption contributing to an increase in the price of goods.

“This erodes households’ purchasing power, and our survey shows that inflationary pressures are becoming an increasingly negative driver of consumer confidence levels.”