Inflationary impact on household spending 'shattering consumer confidence' says index
THE impact of higher prices on household spending has shattered consumer confidence in Northern Ireland, according to new analysis from Danske Bank.
More than a third of respondents to the bank's latest consumer confidence index said high inflation was putting most pressure on their budgets.
But 18 per cent of respondents also pointed to global risks, including the war in Ukraine, as a factor that made them feel less confident, while 15 per cent cited the post-Brexit trading arrangements in Northern Ireland.
The overall index gave a reading of 117 for the first three months of this year, down from 134 in the fourth quarter of last year and below the reading of 137 in the first quarter of 2021.
Compared with the previous quarter, respondents to Danske Bank's survey in March reported feeling less confident about their current finances, future finances, and their expected spending on expensive items, although sentiment around job security increased slightly.
When asked what had the largest positive impact on their confidence levels, 34 per cent highlighted the roll-out of the coronavirus vaccine programme and 27 per cent cited the easing of coronavirus restrictions.
In the latest survey, 42 per cent of people felt their financial position had deteriorated over the previous 12 months, with 21 per cent insisting their finances were in a better position.
On future finances, 43 per cent expect their financial position to worsen over the next year, compared with 18 per cent who believed things would get better.
In terms of spending, 38 per cent expect to spend less on expensive items over the next year, this 26 per cent anticipate shelling out more.
On job security, 13 per cent expect to become more secure in their posts, 61 per cent believe there'll be no change while only 8 per cent thought their job security would worsen.
Danske Bank chief economist Conor Lambe said: “Consumer spending accounts for a considerable proportion of economic activity and is therefore an important driver of economic growth.
“Inflation has already increased sharply and is likely to rise even higher in the months ahead, exerting a further squeeze on consumer spending.
“Economic output is still expected to grow this year but it's important to recognise there are significant headwinds, including high inflation and lower confidence levels, currently facing the Northern Ireland economy.”