Most households will struggle to pay for ‘cut Christmas’ as inflation takes €3,000 off purchasing power

According to credit union research, rampant inflation will shave up to €3,000 off the average household’s purchasing power this year, leading to a leaner Christmas.

The Credit Union Consumer Sentiment Index, released today, shows that 61 percent of people will have less money to spend this festive season, and just 5 percent believe they will have more.

According to economist Austin Hughes, who compiles the index, this represents a significant deterioration compared to last year’s results.

It’s even worse than 2020, when Covid hit many households’ income and expenses.

While a third of consumers will plunder their savings to fund their Christmas spending, a fifth say they will either borrow or don’t know how they’re going to raise the money for Christmas spending.

Most people who said they would borrow for Christmas are between the ages of 45 and 54, while most who don’t know how to finance it are under 45.

The poll, conducted earlier this month with Core Research, suggests a significant number of people will struggle to fund even a “cut Christmas” this year.

Mr Hughes said a rough calculation showed that higher inflation this year would cause the average household’s purchasing power to fall by around €3,000.

This weakens consumers’ purchasing power, he said.

“With Irish inflation expected to be around 8 per cent this year, compared with 2.4 per cent in 2021, consumers will find their room for discretionary spending this Christmas will be severely limited,” Hughes said.

He said that the approaching winter means higher spending on more expensive heating and electricity, significantly higher food bills and that feelings of “poverty” are likely to be pronounced this Christmas.

“In the circumstances, it is hardly surprising that most Irish consumers say they will have less time this Christmas than last year,” he said.

Although the latest data shows that consumers remain “very nervous”, the index reading for this month was not as bad as expected given the financial challenges facing most Irish households.

The index value this month is 45.3; last month it was 46.1. On a scale of one to 100, any reading below 50 indicates a more pessimistic view of the economy, while a reading above 50 means consumers are more optimistic. “This suggests that budget support operations are having some positive impacts,” the report said.

“One could also conclude from November’s readings that Irish consumers feel they have prepared as much as possible for a difficult winter.”

It comes as new figures show Irish shoppers are expected to spend more than €18,000 a minute during Black Friday sales, with women typically spending 66 per cent more than men.

New data from AIB shows Irish consumers are expected to spend around €26 million online this Friday – 33 per cent more than Cyber ​​Monday, which fell on November 28.

The busiest time to spend will be between 10am and 12pm as consumers shop online during working hours. Women typically spend 144 percent more on clothing than men, while men spend 377 percent more on vehicle servicing and sales.

Last year, €5,700 per minute was spent on clothing alone on Black Friday, a 261 percent increase in value compared to a normal day.

John Brennan, Head of SME Banking at AIB, said: “As people prepare for winter against a backdrop of rising living costs, many are looking to get their Christmas shopping done early and find Black Friday deals.” Most households will struggle to pay for ‘cut Christmas’ as inflation takes €3,000 off purchasing power

Fry Electronics Team

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