Saving by Irish households jumps to over €5bn during lockdown
Whether savings are spent or hoarded likely to have big impact on speed of recovery
The Central Bank figures suggest deposits continued to grow in June. Photograph: Crispin Rodwell
Irish households built up a stash of savings during the coronavirus lockdown, with Central Bank figures showing bank deposits jumped to €5.3 billion between April and the end of June. That compares with just €2 billion for the same quarter last year.
Restrictions to curtail the spread of the virus reduced consumer spending in the wider economy while the Government’s wage support schemes maintained income at or close to pre-Covid levels.
As a result some households have been able to save money they would have normally spent on areas such as childcare, transport and recreational activity.
Whether they hoard or spend these savings is likely to have a big impact on the speed of recovery. The Central Bank figures suggest deposits from households continued to grow in June, albeit at a slower pace than in the previous two months, when tougher restrictions were in place.
Launching the Government’s July stimulus package last week, Minister for Finance Paschal Donohoe noted that the lockdown had seen a massive increase in savings.
As a result, a number of tax incentives have been introduced to entice consumers to begin spending again in a bid to drive up demand in the economy.
The most significant is the reduction in the standard rate of VAT to 21 per cent from 23 per cent for a six-month period from September, which, if passed on to consumers, will reduce the cost of a range of goods and services.
The Central Bank figures also show consumer lending recovered somewhat in June, with net borrowing of €45 million recorded.
Over the quarter, households repaid €407 million more than they drew down in their consumer and other loans. This contrasts with net drawdowns of €185 million during the same period last year.
Separate Central Bank spending data shows daily debit and credit card spending up to July 27th remained 6 per cent below the daily average figure for July last year, despite strengthening in recent weeks.
In June, all sectors recorded notable month-on-month increases in spending, as Government restrictions continued to ease, the Central Bank said.
“The largest increases were recorded in the transport and accommodation subsectors, both of which experienced the largest declines in spending since the start of the pandemic,” it said.
There was an 80 per cent upswing in spending on transport in June compared with May, and a 131 per cent increase in spending on accommodation. “This is likely reflective of an increase in people holidaying in Ireland, ” said the Central Bank.
In year-on-year terms, spending in the retail sector was strong in June, with a 40 per cent increase compared with June last year.
Ecommerce spending increased by 16 per cent (or €304 million) in June compared with May, and increased by 32 per cent (or €533 million) on June of last year.
The value of ATM withdrawals followed a similar growth trajectory to retail card spending activity since its trough in mid-April, the figures showed.