‘Cautious’ Christmas planned amid concern over economic slowdown

Shoppers are likely to adopt a mood of “managed caution” this Christmas rather than implement big cutbacks in advance of a feared economic slowdown, according to a new report.

The latest Credit Union Consumer Sentiment Survey, conducted by Core Research over the past fortnight and involving a nationally representative sample of 1,000 adults, shows sentiment has increased to 61.9 this month from 60.4 in October.

It comes as consumers expect that economic growth will slow and the jobs market will soften in the next 12 months.

Views on household finances through the past 12 months have weakened marginally, “perhaps reflecting the reality that, although inflation may have eased, household living costs continue to climb”.

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In contrast, consumers are a little more positive in relation to the outlook for household finances over the next 12 months. “This could reflect the further easing in energy costs and, in particular, a high-profile round of upcoming price cuts from electricity and gas providers,” report author and economist Austin Hughes suggests.

Just over half of consumers (55 per cent) expect to have less to spend than last Christmas while only 7 per cent say they have more to spend.

However, the responses for this Christmas are less negative than last year when the full shock of the cost of living crisis was being felt in rapidly accelerating food and energy prices.

As a result, slightly more consumers are planning to spend more on presents (9 per cent) than last year (7 per cent).

More significantly, the proportion of consumers intending to cut back on presents (55 per cent against 62 per cent) and on entertainment (53 per cent against 61 per cent) is notably lower than in 2022, although still large in absolute terms.

The report also carried out a “rough exercise” which suggests the cost of Christmas is rising by a little over 4 per cent this year, which is a marginally slower pace than the 6 per cent rate seen a year ago, but markedly higher than the 0.5 per cent rate seen in 2021.

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The past two months have been marked by marginal increases in overall consumer sentiment, following successive declines in August and September. But confidence is still running slightly below the levels seen through the summer and remains notably below the long-term series average of 84.8.

“We interpret current survey readings as signalling that the prevailing mood of Irish consumers is one of continuing caution,” says Mr Hughes in the report compiled with the Irish League of Credit Unions, adding that many consumers may think “the worst could be over”.

Three of the five main components of the survey register stronger readings in November than in October. The gains were more pronounced in the survey’s two macro elements which focus on the general economic outlook and job prospects.

The report says this suggests Irish consumers were not overly focused on either the negative preliminary GDP reading for the third quarter or weaker corporation tax receipts in recent months.

The survey also notes a reversal of the weakness in consumer thinking on the outlook for jobs which was a notable feature of an otherwise positive survey in October.

“Our sense is that the increasing possibility that interest rates may have peaked and inflation may be easing likely contributed to some easing in macro gloom,” the report states.