Optimistic outlook has us splashing cash

CHRISTIAN McCASHIN helps you with the cost-of-living crunch

HERE’S some good news: we’re saving less and spending more as our national mood is brightening.

The dark clouds of a threatening recession are clearing and interest rates should start coming down in the late summer, offering relief to thousands of mortgage-holders.

The official household saving rate was 10.08% in the three months of July, August and September, down from 11.05% in the previous three months – a decline coming after half a year of increases.

Part of the reason people are saving less is of course because things cost more now as inflation has been soaring.

The saving rate is the total saved as a percentage of your total disposable income (what’s left in your pocket after all your bills and rent or mortgage are taken care of). It shows how much households are saving for the long term and how much they are spending on the day-to-day.

If the saving rate goes up, it means households are adding more of their income to their savings; if it goes down, it indicates a switch to current expenditure instead of building up wealth.

Though it’s the lowest saving rate for four years, it is in the normal range for the pre-pandemic period. In 2020, it went up because incomes held steady, helped by hefty Government supports, while spending dropped sharply in the midst of the pandemic when most shops were closed and travel stopped.

Permanent TSB’s latest Reflecting Ireland report also shows a more positive public mood than at this time last year, with the number of people expecting a recession falling from 67% to 46%.

The bank’s latest research of consumer behaviour and attitudes has also revealed a fall-off in people expecting the economy to get worse over the coming year, with 47% saying it now versus 63% a year earlier. Almost half (48%) say the economy will improve or stay the same, up from 32% a year ago.

However, the number of people who say they are worse off than a year ago remains high despite a reduction: 54% now versus 63%.

Despite the lifting gloom, more of us than last year plan to cut back on both essential items and other spending because of cost-ofliving pressures. The percentage of people planning to trim essentials has risen from 66% to 71%.

The 45-54 age group is most likely to cut back. Overall:

■ 60% of people say they will curb their energy usage;

■ 53% will reduce grocery bills;

■ 68% will spend less on clothes;

■ 62% will eat out less often;

■ One in two will cut back on domestic and foreign holidays and weekend breaks.

The 45-54 age group is also the most likely to feel worse off than last year, according to the research, with 63% saying it versus an overall national average of 54%.

Almost half (48%) of the group also expect their financial position to deteriorate further, which is significantly higher than the 37% average across all respondents.