Consumer confidence 'in the doldrums' says Danske Bank barometer
CONSUMER confidence in Northern Ireland remained in the doldrums in the October-December quarter as the lack of regional government, the general election, the impact of higher prices and Brexit all weighed heavily on household morale, a survey from Danske Bank has shown.
And despite the return of the devolved institutions and a degree of movement on Brexit, more people in the north actually expect their finances to worsen over the next year compared to those who believe they'll improve - and one in four people say they'll spend LESS on expensive items such as holidays and home improvements.
The bank's regular consumer barometer fell to 129 in quarter four, down from 131 in the previous three months but above the reading of 127 posted in the fourth quarter of 2018.
Some 40 per cent of respondents cited the absence of devolved government as the largest drag on confidence levels while Brexit adversely impacted how they were feeling. One in five (18 per cent) said the impact higher prices had on their household finances was having the most negative influence on them.
Danske Bank's chief economist Conor Lambe said: “Consumers had been pointing to the lack of an Executive as one of the biggest drags on their confidence levels since we introduced this question to our survey in the third quarter of 2017, so the return of the devolved institutions at the start of this year is undoubtedly a welcome development.
“Despite the UK now having left the EU, I believe Brexit will continue to dampen people's confidence throughout this year.
“There is still a high degree of uncertainty around how the blocs will trade with each other once the transition period comes to an end, and how the Northern Ireland protocol within the Brexit Withdrawal Agreement will be applied in practice.
“If progress in the negotiations around these areas can't be evidenced relatively quickly, then nervousness related to Brexit could begin to build and confidence levels could soften further.”
Mr Lambe added: “It's somewhat surprising to see such a large proportion of people continuing to point to the impact of higher prices as the factor having the biggest negative impact on how they were feeling, particularly given the relatively strong rate of wage growth.
“The latest figures show that inflation in the UK was running at just 1.3 per cent at the end of 2019 - well below the 2.1 per cent at the end of 2018 and the 3 per cent at the end of 2017.
“But despite the lower headline inflation rate, prices are still increasing and local people are signalling that those rises are negatively impacting how they view their financial position.”
Regarding factors that positively impacted how people were feeling, 25 per cent highlighted rising wages, 11 per cent selected low interest rates and ten per cent identified increasing house prices.
Mr Lambe said: “The local labour market is one bright spot from a local economic perspective. The employment rate here is currently the highest on record and the unemployment rate is the joint lowest ever.
“The local economy has also enjoyed quarterly increases in the number of jobs from the start of 2016. This strong labour market performance has contributed to the recently observed higher rate of wage growth, which in turn has supported consumer purchasing power.”
Some key quarter-on-quarter findings:
:: 17 per cent of people felt their financial position had improved over the past year, but 25 per cent felt it had deteriorated.
:: 23 per cent of people expected their finances to worsen over the next year, compared with 18 per cent who expected their financial position to improve.
:: 11 per cent of people expected to become more secure in their job, but 12 per cent expected their job security to worsen.
:: 15 per cent of consumers expected to spend more on expensive items such as holidays and home improvements over the next year, but 25 per cent expected to spend less.
:: 10 per cent of people expected to save more this year than they did last year, but 22 per cent thought they wouldn't be able to save as much over the year ahead.