Consumers downbeat over financial prospects

Consumers appear increasingly gloomy about their financial prospects despite upbeat assessments from political and economic circles about sustained recovery taking hold.

If such a recovery is well under way it does not appear to extend as far as many households according to the second Deloitte Consumer Tracker survey.

It provides twice-yearly updates on changes in consumer spending and behaviour, and over the past six months 39 per cent of Irish consumers have become less optimistic about their disposable household income.

An identical number told researchers their view of their fortunes had not changed since the spring. Just 17 per cent said they were more optimistic about their level of disposable income than they were six months ago.

One of the reasons people are so downbeat is because they have had to increase spending on nondiscretionary items such as utility bills over the past six months. The research found 45 per cent of respondents were spending more on utility bills than six months ago while a third were spending greater amounts on transport.

Healthcare spending had increased for 30 per cent of consumers, while housing costs had gone up for 22 per cent of those polled.

As spending on nondiscretionary items has climbed, people have reported decreased levels of spending on more discretionary items with socialising, eating out, alcohol and clothes most likely to take the hit.

Non

discretionary items According to Deloitte, this pattern is set to continue, with almost half of all consumers suggesting they will have to spend even more on non

discretionary items over the next six months.

There is also likely to be a marginal increase in spending on discretionary items as well. On average, an increase of two percentage points in spending across all categories is anticipated when compared with research carried out in March 2014.

According to the survey, 48 per cent of respondents are paying money into a savings account every month, while two in five are making monthly repayments on loans. Just under a third said they had an outstanding balance on a credit card, while 34 per cent say they repay the total balance on a credit card. The survey also found that half of respondents do not pay into a pension fund.

Looking to the future, 60 per cent of respondents said they had “no intention” of making a significant purchase over the next six months although 15 per cent did say they intended to buy a new car, up from 10 per cent in March).

Property

The number of respondents who said they hoped to buy a new property climbed two percentage points to 7 per cent.

"While the findings show that many consumers' financial situations have stayed the same over the last number of months, for those that have experienced a change in circumstances it is more likely to have got worse than better," said Deloitte's head of consumer business, Kevin Sheehan.

“While marginal increases in spend are anticipated, these are mostly likely to be on essential items, with little left for discretionary items.”