Consumer confidence in Northern Ireland fell in the third quarter of this year as the impact of the recent prolonged period of high price rises continued to weigh on sentiment.
But Danske Bank’s latest quarterly Consumer Confidence Index shows that the reading was above that recorded at the same time in 2023.
The findings, based on a survey of 1,000 people from across Northern Ireland, gauges confidence about current and future finances.
And it revealed that people are less confident in relation to their plans to make big ticket purchases such as a holiday or new furniture over the next 12 months .
Just under two fifths (39%) of respondents said the impact of higher prices on household finances was the main factor that made them feel less confident. While the rate of inflation has slowed this year, looking over a longer time period shows that in September 2024, prices were on average 19 per cent higher than in September 2021.
Global risks – including the war in Ukraine and events in the Middle East – had the largest negative impact on confidence levels for 15% of those surveyed, while 14% cited higher interest rates as having the biggest negative impact on sentiment.
Danske Bank economist Hannah Martin said: “We saw a drop in overall confidence in the third quarter of the year, largely driven by downward movements in expectations for personal finances and spending on expensive items over the next 12 months.
“Looking at the economic environment, some factors that may be influencing consumer sentiment include the lingering effects of high inflation and elevated global risks.
“Yet despite the quarterly fall in confidence, the third quarter outturn from our index was still the second highest reading since the start of 2022 and it was also above the long-term average. This suggests that there was more caution in quarter three, but a reasonable level of confidence was still evident among consumers.”
Danske Bank’s report showed that confidence around job security, which tends to have a more muted response to economic developments compared to other measures in the index, improved in the quarter.
While 57% of people thought their job security wouldn’t change, 17% expected to become more secure in their job, compared with only 7% who thought their job security would worsen.
Some 42% of respondents said their financial position had worsened in the previous 12 months, compared with 27% who saw an improvement, and while 31% expected their financial position to improve over the year ahead, 28% expected to become worse off.
Only 20% of consumers said they expected to spend more on expensive items in the year ahead, with 43% expecting to spend less. Just over a quarter (27%) of those surveyed said they expected to save more this year than they did last year, compared with 29% who thought they would save less in the year ahead.
“There is some support for confidence coming from the lower rates of inflation experienced this year, but the impact of the prolonged period of elevated price rises is still taking a toll on consumers,” Ms Martin added.
“How consumer confidence, inflation and the monetary policy environment evolve over the coming months will all be important watchpoints with regards to household spending and economic growth moving forward.”
