Families rein in spending on recession fears

Households gloomy about finances, says Bank of Ireland

Almost two out of three families are holding on to cash as they are uncertain about the future, a new report from Bank of Ireland has found.

Bank of Ireland’s Economic Pulse, a monthly gauge of consumers’ and businesses’ moods, hit a 17-month low of 70.2 in July, when both groups continued to feel inflation’s pinch.

The study found that 64 per cent of households were holding out on spending while just one in six considered this a good time for big purchases such as furniture or electrical goods.

A “prevailing backdrop of high inflation and uncertainty” left families gloomier about their financial prospects than in previous months, the survey found.


Dr Loretta O’Sullivan, Bank of Ireland group chief economist, said the consumer pulse fell below its Covid-19 low, while all businesses were less optimistic about the future.

However, she argued there were some bright notes in the July pulse. The number of companies struggling with shortages and costs appeared to stabilise during the month.

“On the labour front, pay increases are in prospect as businesses look to retain and attract staff, and workers find it easier to get or change jobs, but with an eye to competitiveness and reflecting greater economic uncertainty, wage expectations remain relatively contained,” Dr O’Sullivan said.

Homeowners were also less bullish about the properties’ values, although three in five still think these will increase over the coming year, compared with about 80 per cent in June.

The European Central Bank’s decision to increase interest rates by 0.5 per cent, which is likely to hike mortgage repayments, is partly responsible for this, according to the study.

Businesses across industry, services, retail and building all lowered their near-term expectations. Retailers fear waning consumer confidence, while other industries are worried about the general economic outlook.

Sentiment was down in all of the Republic’s regions this month, the survey found.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas