Irish consumers pessimistic about cost of living despite fall in prices
KBC Bank survey finds disparity between official inflation data and consumer perceptions
‘The higher perceived cost of living is likely driven by a squeezed middle-aged factor, where consumers in this age group may be seeing notable additional costs reflecting outlays for their children and, perhaps, for their ageing parents.’ Photograph: Niall Carson/PA Wire
Irish consumers believe the cost of living is rising at a higher rate than the official figures suggest, a survey by KBC Bank has found.
Irish consumer prices fell by 1.1 per cent in August compared to a year ago, and by 0.5 per cent on average since March.
However, this decline does not appear to be mirrored in current consumer thinking, the bank said.
As part of its monthly consumer sentiment survey, KBC asked consumers to estimate how much their personal overall cost of living has changed in the past 12 months.
Nearly a third (32.1 per cent) thought it had increased by 5 per cent or more. On average, consumers estimated that their cost of living had increased by about 3.3 per cent over the past 12 months, “a sharp divergence from the official inflation rate of -1.1 per cent in August.”
The report noted that while headline inflation in the Republic has been weak, averaging about 0.3 per cent a year since 2013, the cost of certain things has increased sharply. Private rents rose by about 7 per cent annually over the period while private health insurance rose by about 4.5 per cent annually.
“For many households, spending on items like these is absorbing an ever-increasing share of their incomes,” KBC bank economist Shawn Britton said.
“A common finding has been that households are reporting that their own personal financial situation has not improved to the same extent that the main Irish macroeconomic indicators might suggest,” the report said.
The perception of how severe inflation is seemed to differ depending on where people were located, with Leinster – excluding Dublin – seeing a much higher perceived rate (3.7 per cent) compared to Munster, Connacht, Ulster and Dublin. This may reflect consumers in this region responding to increases in house prices that since 2013 have been clearly faster than seen nationwide, Ms Britton said.
Perceptions also broke down across age groups, with those aged between 45 and 54 years tending to think prices were rising at a faster rate than the rate perceived by younger-aged groups.
“For the former group, the higher perceived cost of living is likely driven by a squeezed middle-aged factor, where consumers in this age group may be seeing notable additional costs reflecting outlays for their children and, perhaps, for their ageing parents,” Ms Britton said.
“Part of this higher cost of living for 45-54 year olds may not be a pure price inflation effect. Instead, it likely also reflects a life stage need for significant increases in spending in areas such as education and healthcare,” she added.
“The lower perceived cost of living for 18-24 year olds may owe something to a contribution to living costs by parents and/or other family,” Ms Britton said.