Household savings in Q2 2022 were above pre-Covid due to a continual increase in real incomes, as more people are in work and the average wage is going up.
Spending also rose in the quarter, not only due to higher prices, but also because a greater volume of goods and services were bought or consumed.
CSO statistician Peter Culhane noted that before the pandemic, consumer spending was rising in line with incomes, leaving savings at a steady rate.
“The usual pattern of household spending and saving was disrupted by Covid in 2020 and 2021. By the second quarter of 2022, the pandemic restrictions had been removed, but the household saving rate remained far above its usual level," he said.
“While the savings rate this quarter is far below the peak in 2020, it is significantly higher than its long-term average of 10.4% before the pandemic. The savings habits developed during the restrictions appear to be sticking.
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“It might have been expected that with restrictions removed, some of the savings built up over the previous two years would be spent, bringing down the saving rate, but in fact, households continued to accumulate rather than spend.
“Consumption is increasing, owing to inflation and also to higher volumes of goods and services consumed. However, households have generally decided not to spend their lockdown savings, but rather to keep their money in the bank,” he added.
Culhane speculated that the high level of saving may be precautionary as global economic uncertainty affects spending decisions. It may also be caused by shortages of goods such as cars owing to supply chain disruption related to the pandemic.
“It is possible that household saving levels will remain elevated,” said Culhane. “19.1% is a high saving rate for Ireland but is in line with some other European countries. In Germany the saving rate for the period 2010-2019 was 17.5% and in Switzerland it was 22.0%.“
Rising incomes
Incomes of households rose in the second quarter of the year. Overall household income is driven by pay to workers and the combination of higher average pay per hour and more people in work drove up wages and salaries. The wage bill increased across almost all sectors.
Growth was highest in Distribution, Transport, Hotels & Restaurants, which was up €213m or 3.9% in the quarter. This sector had an increase in numbers employed, but also an increase in average earnings in the quarter. There was also significant growth in the pay to workers in Industry; and Professional, Admin & Support Services.
There was a slight rise in spending in the quarter due to price inflation, as well as larger volumes of goods and services being consumed.
The CSO calculates that household consumption rose 1.8% in the April-June 2022 period.
The Retail Sales Index shows the biggest volume increases in Cars, Food, and Pharmaceutical and Medical & Cosmetic Articles.
The volume of Furniture & Lighting sales was down significantly in the period.
