Slight drop in savings rate, but consumers continue to put money aside

HOUSEHOLDS save less as their standard of living falls and they save less.

New figures show that households saved 19% of their income in the July-September period.

This is well above the long-term average, as precautionary saving has been a feature of consumer budgeting since the pandemic began.

But it’s down from 20 percent earlier in the year, according to a Central Statistics Office report on household saving.

Before the pandemic, households were saving about 10 percent of their total disposable income, so 19 percent is still well above the long-term average, the CSO said.

Irish households have a record high of nearly €150 billion in savings from Irish banks and credit unions, despite receiving some of the lowest interest rates in the eurozone.

A decline in people’s living standards due to lower disposable incomes has been cited by statisticians for the lower savings rate this year.

“The standard of living (total real disposable income) of Irish households has fallen in three of the last four quarters.

“This is a decrease from a peak in the third quarter of 2021, which was the highest level in the 24-year series,” the CSO said.

High inflation rates mean falling household incomes.

Statistician Peter Culhane said: “Household incomes rose as more people were in the labor force, but inflation outpaced this growth, keeping real income lower.”

Consumers are spending more, partly because of high inflation, but also because more goods and services have been consumed.

Savings rates peaked at 33.8 percent in the second three months of 2020 at the height of the Covid pandemic.

Mr Culhane said: “Saving levels remain above pre-Covid-19 levels of around 10 per cent as some of the saving habits developed during restrictions are maintained.

“Households have generally chosen not to spend their savings, but instead continue to grow their wealth and reduce their borrowing.”

The eagerness of those with spare funds to save is because Irish banks are paying savers rates four times lower than the eurozone average.

At a time when mortgage interest rates are skyrocketing, the average payout on savings is just 0.17 percent – or $17 on a $10,000 annual deposit – compared to a eurozone average of 0. 69 percent.

Banks were called on to give savers a break after interest rates on savings in this country turned out to be among the lowest in the euro zone.

And the tariffs offered have hardly changed in the last four years.

This is despite a sharp rise in European Central Bank interest rates in recent months and a rise in savings rates in the rest of Europe.

According to the central bank, the Irish average rate is four times lower than the euro zone average of 0.69 percent. Slight drop in savings rate, but consumers continue to put money aside

Fry Electronics Team

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