Household saving increases sharply to record level

IRISH HOUSEHOLDS are saving more of their disposable incomes, according to new figures published yesterday by the Central Statistics Office.

In the first three months of the year, households saved 14.2 per cent of their gross disposable income. This was sharply up from the final three months of last year, as is the historic trend. The figures are not adjusted for seasonal factors and, as households traditionally save less (and spend more) in the run-up to Christmas, the pattern is always sharply reversed in the January-March period.

Given the absence of seasonally-adjusted figures, the year-on-year comparison provides a more meaningful measure of households’ attitudes to saving and consumption.

The savings rate has increased markedly, from 11.2 per cent of gross disposable income in the first quarter of 2011 to 14.2 per cent in the first quarter of this year. This was the highest first-quarter savings rate registered since the figures were first compiled a decade ago.

The higher savings rate continues a trend observed in the second half of last year. The trend is more visible when a rolling average of four quarters is used, smoothing out seasonal effects (see chart). It shows that during the bubble period up to 2007 household savings fell. But as the recession took hold the savings rate rose sharply as households used income to pay down debt and build up savings.