Con­sumer mood has dark­ened

The Irish Times - - Business News -

In­cred­i­ble though it may sound, Ir­ish house­holds are now 76 per cent wealth­ier, tech­ni­cally speak­ing, than they were at the depth of the re­ces­sion. Their col­lec­tive net worth hit a new record of ¤757 bil­lion in the sec­ond quar­ter of 2018, ac­cord­ing to the lat­est fig­ures from the Cen­tral Bank.

The pre-crash peak of ¤719.6 bil­lion, reached in the sec­ond quar­ter of 2007, fell all the way down to a post-cri­sis low of ¤430 bil­lion in the sec­ond quar­ter of 2012, be­fore re­cov­er­ing.

House­hold net worth is cal­cu­lated by adding the to­tal value of the hous­ing stock and fi­nan­cial as­sets (sav­ings and in­vest­ments) and sub­tract­ing the sum of the debt owed.

So what th­ese num­bers tell us is less about how pros­per­ous we feel and more about the story of the prop­erty boom, crash and sub­se­quent re­cov­ery in val­ues.

Mort­gage hold­ers will doubt­less feel less fi­nan­cial anx­i­ety if they have climbed out of neg­a­tive eq­uity, but that doesn’t nec­es­sar­ily trans­late into more cash-to-splash.

House­hold net worth to­tals and av­er­ages also say noth­ing about the un­equal dis­tri­bu­tion of as­sets and debts across in­come and age groups.

Do we feel wealthy? The most re­cent con­sumer sen­ti­ment in­dex from KBC Bank Ire­land and the Eco­nomic and So­cial Re­search In­sti­tute points to more of a mud­dling-through, steady-as-she-goes, post-re­ces­sion, Brexit-ad­dled vibe.

Con­fi­dence has dropped off since the sum­mer and is now hov­er­ing close to a four-year low, with Ir­ish house­holds more down­beat about the cur­rent state of their fi­nances and more cau­tious about spend­ing. It is hardly ideal mood mu­sic for Ir­ish re­tail­ers com­ing into the crit­i­cal Christ­mas sea­son.

As a pro­por­tion of dis­pos­able in­come, house­hold debt may be fall­ing fast, but as the Cen­tral Bank noted, Ir­ish house­holds are the fourth most in­debted in the EU. This doesn’t give us much breath­ing room if the econ­omy does take an­other turn.

So while house­hold net worth in the State now stands at the equiv­a­lent of ¤155,856 per per­son, the av­er­age Ir­ish per­son is un­likely to be rush­ing out to spend it all in the one shop.

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