Business

New report links rising levels of consumer confidence with vaccination progress

Consumer confidence in the north rose in fourth quarter of 2020 amid news of coronavirus vaccines, a new report from Danske Bank states. Picture by Danny Lawson/PA Wire.
Ryan McAleer

RISING optimism linked to the Covid-19 vaccination programme and the potential reopening of the economy helped the pound hit its highest level against the dollar in nearly three years on Monday.

It comes as a new report from Danske Bank linked the rising levels of consumer confidence in the north toward the end of 2020 with the vaccination progress.

But the lender's latest consumer confidence index found a significant number of people in Northern Ireland still remain cautious over their spending, with 42 per cent indicating they will spend less on high-value items over the next year, compared with 21 per cent who expect to spend more.

Danske Bank's chief economist Conor Lambe said the reintroduction of more stringent coronavirus restrictions in the latter part of 2020 stalled the economic recovery that had begun during the third quarter.

“With the current restrictions requiring many businesses to remain closed, the first quarter of 2021 is proving to be another challenging one for the Northern Ireland economy,” he said.

“But assuming that the restrictions can be gradually eased throughout the year as coronavirus case numbers hopefully come down and the vaccine programme is rolled out further, the local economy is expected to return to positive rates of growth from the second quarter of 2021 onwards.”

Despite the improving signs of consumer confidence in the fourth quarter (Q4) of 2020, the index remained below pre-pandemic levels.

The looming end of the furlough scheme at the end of April appeared a factor in the latest survey, with expectations around job security weakening.

The index also reflected the divide between higher and lower income households, with one-in-four reporting an improved financial situation in Q4 2020, against 29 per cent who felt their finances had deteriorated.

Today the Institute for Fiscal Studies and Citi will call on the UK Government to gently wind down the furlough scheme to protect lower-income households, who are at a higher risk of unemployment.

In contrast, higher-income households managed to build up an extra £125 billion worth of savings while being stuck at home, with little to spend the money on.

Conor Lambe said that assuming coronavirus restrictions are gradually eased throughout 2021, consumer confidence will be a key factor in influencing the speed of the economic recovery.

“On balance, consumers are expected to remain relatively cautious with regards to their spending decisions given the uncertainty around the pandemic,” he said.

“But the quarterly rise in confidence at the end of 2020 was a welcome development and it must be hoped that sentiment can improve further as we move through 2021 and help the economic recovery to really take hold.”

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