Consumer confidence fell sharply in Q1 as high inflation put pressure on household finances

Respondents to Danske Bank’s survey reported feeling less confident about their current finances

By Claire Cartmill
Tuesday, 17th May 2022, 7:00 am

Consumer confidence in Northern Ireland declined sharply in the first quarter of this year as high inflation put pressure on household finances, according to new analysis from Danske Bank.

The Danske Bank Northern Ireland Consumer Confidence Index decreased to a reading of 117 in the first quarter of 2022, down from 134 in the fourth quarter of last year, and also below the reading of 137 posted in the first quarter of 2021.

Compared with the previous quarter, respondents to Danske Bank’s survey in March reported feeling less confident about their current finances, future finances, and their expected spending on expensive items. However, confidence around job security increased slightly.

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Danske Bank chief economist Conor Lambe

Asked what had the largest negative impact on their confidence levels, 36% of respondents said the impact of higher prices on their household finances had dented confidence. This was followed by 18% of people who pointed to global risks, including the war in Ukraine, as a factor that made them feel less confident, while 15% pointed to the post-Brexit trading arrangements in Northern Ireland.

When asked what had the largest positive impact on their confidence levels, 34% of people highlighted the rollout of the coronavirus vaccine programme and 27% of those who responded cited the easing of coronavirus restrictions as having a positive impact on them.

In the latest survey, 42% of people felt their financial position had deteriorated over the previous 12 months, with 21% saying their finances were in a better position.

Asked about their future finances, 43% of those surveyed expected their financial position to worsen over the next year, compared with 18% who believed their finances would be in a better position in 12 months’ time.

In terms of spending, 38% of respondents said they expected to spend less on expensive items over the next year, compared with 26% who anticipated spending more. Expectations around job security were slightly more positive as 13% of people expected to become more secure in their jobs, 61% expected no change in job security and only 8% thought their job security would worsen.

Commenting on the latest release of the index, Danske Bank chief economist Conor Lambe said: “In Northern Ireland and the wider UK, consumer spending accounts for a considerable proportion of economic activity and is therefore an important driver of economic growth.

Inflation has already increased sharply and is likely to rise even higher in the months ahead, exerting a further squeeze on consumer spending.

“Economic output is still expected to grow this year but it’s important to recognise that there are significant headwinds, including high inflation and lower confidence levels, currently facing the Northern Ireland economy.”