Business

NI households continue to feel the squeeze due to high inflation

Consumer confidence has fallen in the second quarter of 2017 as Northern Ireland households continue to feel the squeeze.
Consumer confidence has fallen in the second quarter of 2017 as Northern Ireland households continue to feel the squeeze. Consumer confidence has fallen in the second quarter of 2017 as Northern Ireland households continue to feel the squeeze.

CONSUMER confidence has fallen in the second quarter of 2017 as Northern Ireland households continue to feel the squeeze.

The latest research from Danske Bank shows that confidence fell fell by two points between the first quarter of the year (141) and July (139), with prospects for the year ahead far from positive.

The Consumer Confidence Index has revealed that households are less optimistic about their financial prospects for the next 12 months, with expectations falling by six points compared with the start of the year, while the outlook for savings is more bleak, with a seven point fall reported.

Of all those surveyed 15 per cent said they expect their finances to improve over the next year, but 16 per cent believe their financial position will deteriorate, while the component of the index that examines how consumers feel about their current financial position compared with a year earlier fell by three points.

One of the few bright spots from the figures was seen in overall job security, as consumer expectations increased by two points in July.

Broadly speaking, younger people feel more positive about their current financial position than older people according to the research as 24 per cent of 16-24 year olds and 35 per cent of 25-34 year olds believe their finances have improved over the last year. By contrast 21 per cent of 35-49 year olds, 28 per cent of 50-64 year olds and 18 per cent of people older than 65, think that their current financial position is worse than it was last year.

Reflecting on the figures Danske Bank economist Conor Lambe said high inflation was continuing to put the squeeze on consumers.

“Over the first six months of 2016, the average inflation rate was 0.4 per cent. Over the same period this year, inflation averaged 2.4 per cent. This high inflation has led to falling real wages and is exerting downward pressure on consumers’ purchasing power. In this environment, a fall back in consumer sentiment around current finances was to be expected.”

Mr Lambe added that he expected the pressure on households to continue into next year.

“Inflation is forecast to remain above target over the rest of 2017 and into 2018. Wage increases are unlikely to be sufficient to push real earnings growth well into positive territory. Therefore, the squeeze on consumers is expected to continue and the fall in this part of the index suggests that households in Northern Ireland recognise this to be the case.”