Consumer Sentiment Dips to Three-Month Low Amid Rising Costs

Consumer sentiment in Ireland has fallen to its lowest level in three months, reaching a reading of 59.9 in October, according to the latest findings from the Credit Union Consumer Sentiment Index. The decline, down from 61.7 in September and significantly lower than 74.1 in October of the previous year, reflects growing concerns among households as they prepare for the winter months. This downturn follows the recent budget announcement that did not introduce any adjustments to income tax bands or one-off measures to alleviate the cost of living.

The analysis by economist Austin Hughes indicates that the modest monthly change in sentiment coincides with expectations that the new budget will diminish spending power for many consumers. Hughes noted that there has been a significant rise in inflation recently, contributing to a more negative outlook on household finances compared to the post-budget period of last year.

Weaknesses in Household Finances

Out of the five components of the sentiment survey, four showed a decline in October compared to September, highlighting a particular weakness in household financial assessments. Hughes remarked that while the month-on-month changes were not drastic, they resulted in the poorest evaluation of household finances in the past year, the lowest since December 2023.

Financial strains are currently a pressing concern for many Irish consumers, leading to predictions that overall spending growth is likely to slow down in the coming year. The survey revealed that 76% of participants expect living costs to rise in 2026, with a quarter anticipating a “large” increase. The primary areas of concern include grocery prices and energy bills, whereas expectations for lower costs are mainly related to entertainment and dining out, a trend that Hughes attributes to a potential pullback in discretionary spending.

Income Expectations and Economic Disparities

Regarding household income, only one in three respondents foresee an increase in their earnings next year, with merely 4% expecting a sizeable rise of more than 5%. Hughes emphasized that the responses indicate a widespread belief among consumers that increases in living costs will significantly outpace any gains in income in the approaching year.

The survey also noted demographic differences, with older consumers more likely to predict substantial increases in living costs than younger individuals, who are more optimistic about potential price reductions. Hughes pointed out a disconnect between the current negative sentiment surrounding household finances and official data suggesting that average wages are increasing faster than consumer prices.

He explained that average figures might mask the economic realities faced by various income groups, particularly as the lowest 40% of households have reported negative savings every year from 2010 to 2023. This persistent financial strain has left many inadequately prepared to cope with the surging prices experienced in recent years.

The Credit Union Consumer Sentiment Index is conducted by Core Research on behalf of the Irish League of Credit Unions and is based on a survey of 1,000 adults. As consumers navigate these challenging financial waters, the data underscores the growing need for targeted support and effective measures to address the cost of living crisis.