Middle-aged people with children hit hardest by coronavirus recession

One in eight Irish consumers have no way of financing a €1,000 hit to their income, a survey assessing the capacity of consumers to weather the financial storm stemming from the Covid-19 crisis has found.

It also indicates that consumers in the 35-54 age group were less able to cope with financial shocks than other age groups, probably reflecting their greater financial commitments.

KBC Bank’s April consumer sentiment survey contained a supplementary question, which examined the financial resilience of Irish consumers.

It asked how consumers would handle an unexpected financial emergency amounting to €1,000. The question is based on one asked by the US Federal Reserve in its annual survey of the financial wellbeing of American households.

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The survey found the capacity of people to cope with a financial hit varied significantly.

Roughly one in eight consumers here said they were in a position to handle a once-off financial emergency costing €1,000 whereas almost as many would be completely unable to finance such a difficulty through any means.

“This result suggests while the ‘macro’ impact of the current crisis is broadly felt, the severity of ‘micro’ impacts varies markedly across households,” KBC economist Austin Hughes said.

“While the nature of the current crisis is notably different to a once-off financial difficulty, the responses may give some sense of divergences in the financial capacity of different consumers to deal with current financial pressures,” he said.

Credit cards

The survey found just under half of Irish consumers would weather a financial emergency either by using their current income (12 per cent) or by dipping into their savings (33 per cent).

About one in four consumers (27 per cent) would borrow to pay for an unexpected emergency with about a third of these using a credit card for that purpose.

About one in 10 would borrow from a family member or friend, while one in 20 said they would sell something.

Among those unable to pay an unexpected expense, the responses were negatively correlated with income levels, the survey found, with the share of respondents outside Dublin higher than in the capital.

“The age group showing greatest strains was those aged 35-54, presumably reflecting the range of pre-committed outgoings related to housing and children,” the survey said.

KBC Bank’s monthly sentiment survey, published last week, showed consumer sentiment here suffered its largest monthly drop on record in April, with the index falling from from 77.3 to 42.6, worse than anything generated by the Brexit uncertainty last year.

In March about three in five (62.9 per cent) consumers thought coronavirus would have a substantial or somewhat large effect on the Irish economy.

However, by April this had increased sharply, with nearly nine in 10 (87.9 per cent) consumers giving this response, reflecting the speed at which the outbreak has grown to dominate sentiment here.