The Households Saving Rate was 14% in the first three months of 2023, down from 24% at the end of 2022.
Most of this saving went into bank deposits and to buying or improving homes.
The lower rate of saving in the first quarter of this year marks a departure from the high rate that had prevailed since the pandemic arrived. The 14% saving rate is similar to that in the last three months of 2019.
Saving declined this quarter as consumption grew while disposable income shrank.
Consumption rose in the first quarter of 2023 largely due to higher prices, but also due to higher volumes of goods and services being bought.
In March, the Consumer Price Index (CPI) showed a three-month rise of 1.9%. The cost of Housing, Water, Electricity, Gas & Other Fuels was again a major contributor to the overall increase in the cost of living: within this item there was a decline in the cost of Energy and a rise in Mortgage Interest in the quarter, compared to prices at the end of 2022. Hotels & Restaurants and Food & Non-Alcoholic Beverages were also significantly more expensive in the quarter.
After adjusting for the usual seasonal dip in consumption after Christmas, the volume of goods and services bought by households grew in the first quarter of the year. The Retail Sales Index shows highest volume increases in Textiles, Clothing & Footwear and Furniture & Lighting, but a decline in sales in Bars. The Services Index showed growth in Food Service & Accommodation (restaurants and hotels).
Total Disposable Income (TDI) of households declined in the first quarter of 2023. To look at the underlying rate, we adjust for inflation and seasonal factors. This real adjusted TDI was down 11% compared to the last quarter of 2022. However, even taking inflation into account, it is still 2% higher than pre-pandemic levels of the last quarter of 2019 and 15% higher than the 2008 peak.
Compensation of Employees at current prices seasonally adjusted fell slightly this quarter compared to the last quarter of 2022. Figure 3 illustrates the changes by economic sector in the quarter after adjusting for seasonal factors. The largest decrease quarter-on-quarter was in Public Administration, Education & Health. This was because the last quarter of 2022 was unusually high, due to back-dated payments under the Building Momentum agreement being received in that period. Compensation of employees was higher in most other sectors owing to a combination of higher average weekly pay (seasonally adjusted) and more people in work.
As well as wages, TDI also includes other income such as self-employed earnings, interest and dividends received and social benefits (such as Child Benefit), but is after deduction of income taxes, social contributions (such as PRSI) and interest paid. More detail will be published in the Institutional Sector Accounts next month.
| sector | Change (Seasonally Adjusted) since Q4-2022 €m |
|---|---|
| Agriculture, Forestry and Fishing | 50.2190651987783 |
| Industry (excl. Construction) | 119.822648708844 |
| Construction | -15.0116199007796 |
| Distribution, Transport, Hotels and Restaurants | 157.500917608627 |
| Information and Communication | -6.94936280922184 |
| Financial and Insurance Activities | 83.9169272215977 |
| Real Estate Activities | -7.65213332622079 |
| Professional, Admin and Support Services | 64.8759255818804 |
| Public Admin, Education and Health | -567.043608881251 |
| Arts, Entertainment and Other Services | 24.9081374478586 |
Saving declined sharply in the first quarter of 2023 as consumption grew and incomes of households dropped. The ratio of saving to TDI was 14% in the quarter, similar to the last quarter of 2019. The rate was generally over 20% during and after the COVID-19 pandemic, but even this quarter it remains higher than typical values before 2020.
Household saving is added to wealth either as real assets (such as new homes), or financial assets (such as deposits), or as paying off liabilities (such as mortgage debt). In the last quarter of 2022, before adjusting for seasonality or inflation, households saved €6.4bn. Then, investment in dwellings and improvements (most of which is by households) was €3.0bn. Figures from the Central Bank of Ireland show that households added €2.6bn to their deposits in banks and loan liabilities of households were largely unchanged in the quarter. Growth in dwellings and deposits therefore account for most of the saving; while pension funds, and other investments also absorbed some of saving accrued.
While this quarter shows a sharp decline in the saving rate, households (taken collectively) are in a strong economic position. Household deposits with Irish banks were €151bn at the end of March, compared to €110bn at the end of 2019 and €83bn at the end of 2007. They have €100bn in loans with Irish credit institutions, compared to €87bn at the end of 2019 and €153bn at the end of 2007.
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Statistician's Comment
The Central Statistics Office (CSO) has today (08 June 2023) released Household Saving Q1 2023.
Commenting on the results, Peter Culhane, Statistician in the National Accounts Analysis & Globalisation Division, said: "This year we are seeing a return to a more typical ratio of saving to spending for Irish households. The rate of saving over 20% that prevailed since the COVID-19 pandemic arrived was highly unusual. The 14% rate this quarter is similar to the profile of spending and saving in 2019.
Income and Consumption
The Consumer Price Index was 2% higher at the end of March than at the end of December and this drove higher spending by households. But there were also higher volumes of consumption in the quarter.
On the income side, wages and salaries were down slightly even before taking account of inflation. In real terms, adjusting for price changes and seasonal factors, total disposable income declined 11% in the quarter.
Overall, household income is still higher than consumption, and households are still adding to their considerable deposits, they are just adding to wealth at a slower rate."