Households in the Republic saved less money in the first three months of the year than during the pandemic as disposable incomes and wages shrank amid rampant consumer price inflation.
New data from the Central Statistics Office (CSO) shows that households saved €1 for every €7.14 they spent in the first quarter, a savings rate of 14 per cent. This represents a steep decline from the average 20 per cent rate that prevailed during the Covid-19 pandemic, which triggered a spike in saving. Irish households placed an extra €16 billion on deposit during the Covid crisis, bringing the total to a record €148.6 billion by the end of 2022, according to the most recent Central Bank figures.
But the 14 per cent saving rate observed in the first quarter of 2023 is broadly “similar to the profile of spending and saving in 2019″, said Peter Culhane, a statistician in the national accounts and globalisation division of the CSO.
Overall, the decline in savings in the first quarter was triggered by a two percentage point rise in the Consumer Price Index (CPI) from the start of the year to the end of March, he said. While higher prices “drove higher spending” by households, consumers also bought more goods and services in the first quarter, Mr Culhane said.
At the same time, wages and salaries were down slightly in the quarter. Disposable incomes, meanwhile, declined 11 per cent over the three-month period as inflation eroded consumer purchasing power.
“Overall, household income is still higher than consumption, and households are still adding to their considerable deposits, they are just adding to wealth at a slower rate,” he said.
Irish households have experienced a sharp downturn in living standards over the past year against the backdrop of soaring global inflation.
OECD figures published in April showed that while the average pretax wage in the Republic rose by 4.8 per cent to €54,649 last year, real earnings – how much money an individual makes after adjusting for inflation – still fell because of the high rate of inflation.
With inflation averaging 8.4 per cent last year, real wages were estimated to have decreased by 3.3 per cent, representing one of the biggest erosions in living standards here since the 2008 financial crisis.
Also on Thursday, CSO data showed that the State’s inflation rate fell for a third consecutive month in May on the back of falling transport and energy costs.
The agency said consumer prices, as measured by the CPI, rose at an annual rate of 6.6 per cent last month, down from 7.2 per cent in April. May was the 12th straight month where the annual increase in consumer prices was at least 5 per cent.