While Irish inflation has been low in recent years—consumer prices increased by only 0.3 percent yearly from 2013 onwards—rapid price rises in particular industries have meant that many customers’ wallets have been pinched more than the official statistic implies. Private rentals have risen by 7% per year during the same time, while health insurance has risen by around 4.5 percent per year. Spending on things like these is consuming an ever-increasing percentage of many people’ incomes. A recurrent finding in the KBC Bank consumer’s take poll is that people feel that their own individual economic condition has not progressed as much as the key Irish macroeconomic factors imply.
Consumer prices in Ireland decreased by 1.1 percent in August compared to the same period last year, and by 0.5 percent on average since March, according to official inflation statistics. This drop, however, does not appear to be reflected in current consumer sentiment. We asked customers to estimate how much their own total cost of housing has risen in the past 12 months as part of the general consumer mood poll for August. Although over a third of the population feel their cost of living has grown by a good percentage, approximately one in five (22.1%) believe it has not changed at all. Consumers in Ireland believe their cost of living has risen by roughly 3.3 percent in the last year, a significant difference from the official inflation figure of -1.1 percent in August.
The perceived severity of inflation varies depending on the season, excluding Dublin, had a considerably higher rate (3.7 percent than other cities. This might be a result of customers in this region reacting to home price rises that have been significantly quicker than the national average for seven years. The greater perceived cost of housing for most people is likely due to a “crowded middle-aged” effect, in which consumers in the age group may be facing significant additional expenditures as a result of expenditures for their kids and possibly their elderly parents. Part of the greater cost of living for those aged between 45 and 54 may not be due to pure price inflation. Instead, it’s more likely to indicate a need for large increases in spending in sectors like education and healthcare as people get older.
The reduced perceived cost of living for the youth might be due to parental or other family members contributing to living expenses. In general, there may be a rise in extra outlays, or a “volume impact,” in addition to the “stock prices” that increases Irish consumers’ living costs. Some of this might be attributed to a temporary increase in expenditure on things linked to the coronavirus and the resulting lockdown, such as meals and sanitizing supplies. As the constraints around the coronavirus pandemic relax, these may become less important.
