Institutional Sector Accounts Non-Financial Quarter 4 2023

The household saving rate in the fourth quarter of 2023 was 12.09% as seasonally adjusted Final Consumption Expenditure (FCE, P.3) rose along with Total Disposable Income (TDI) in the quarter. For the year 2023 as a whole, the saving rate was 12.40%.

As Figure 1.1 shows, the rate is slightly above its pre-pandemic level. The saving rate declined from a peak of 32.45% in Q2 2020 to 10.56% at the end of 2022 and rose again in the first quarter of 2023 before settling back down.

The 12.4% saving rate for the year as a whole is similar to that of 2022 (12.23%), it is higher than 2019's level (10.12%), and higher any year before that, back to 2010 (13.46%), during the credit crisis.   

Households used their savings to add to their wealth in the form of physical assets or financial assets. In 2023, households saved (B.8g) €19bn of which €10bn was spent on capital assets (P.5), such as houses. Deposits in Irish credit institutions increased by €4.4bn. The increase in pension assets (D.8) was €4bn (this is due to contributions paid in exceeding benefits paid out, and separate from valuation changes such as a rise in share prices). Households also invested in financial assets such as shares, funds and life assurance policies (which includes annuities). On the other side of the account they also took out new loans to the value of €2.0bn more than they repaid. Full quarterly accounts of assets and liabilities in financial instruments will be published by the Central Bank.

Household Income

Gross Disposable Income (B.6g) was €37.1bn in Q4 2023 before price and seasonal adjustment (that is, nominal unadjusted), an increase of €2.9bn or 8.5% on Q4 2022. This, together with the adjustment for pension entitlements (D.8), Total Disposable Income (TDI) was €38.2bn. Inflation meant that much of the increase in household revenue in the quarter was required to pay more for the same quantity of goods and services. Figure 1.2 below shows quarterly TDI before and after adjustments.

Net income on financial assets and liabilities (D.4 interest, dividends, return on pension and life assurance investment etc) more than doubled from €3.6bn in 2019 to €8.0bn in 2023 (current prices). Households have far more financial assets on which they receive income than financial liabilities on which they must pay interest. Over the last four years, assets have increased by almost a quarter (from €416bn to €515bn), while liabilities are unchanged (around €145bn). Central banks have also raised interest rates in response to inflation, increasing the flows associated with financial assets and liabilities.

Self-employed income (B.2A3G) also increased in the latest quarter (see Table 1.2 below). These higher earnings meant that households also paid more tax (D.5) and social contributions like PRSI (D.61). However, the biggest driver of household incomes is Compensation of Employees (CoE), which grew from €101bn in 2019 to €132bn in 2023.

Compensation of Employees

In the final quarter of 2023, CoE (D.1) current prices seasonally adjusted rose by 1.4% compared to Q3 2023. Figure 1.3 illustrates the changes by economic sector in the quarter after adjusting for seasonal factors. All economic activity sectors paid more to their workers in the quarter. The most significant rise was in Industry, which grew by 2.3%. This increase was due to more people in work, rather than higher average earnings. The Earnings, Hours and Labour Costs Survey showed seasonally adjusted average hourly earnings largely unchanged (-0.13%), while the Labour Force Survey showed numbers employed were up 4% in the year and 1% in the quarter. There were 2.7 million people in employment in Ireland at the end of 2023, which is 14% more than there were four years previously.

Consumption

Consumption normally rises in the last three months of the year, as Christmas is a busy period for retailers. People spent €37.3bn in the last three months of 2023, which was €2.8bn more than in the three months July-September 2023, and €2.5bn more than in the final three months of 2022 (see Table 1.2, below). Once seasonal factors have been taken into account, consumption rose by €616m (1.5%, see Table 1.1, above). 

The Consumer Price Index showed prices at the end of the quarter were 4.6% higher than a year previously. The largest price increases in the 12 months to December 2023 were in Recreation & Culture (+10.3%) and Restaurants & Hotels (+6.6%). Once these price rises and seasonal factors are taken into account, in real terms final consumption expenditure was unchanged (see table ISQ04) in the quarter; all the increased spending was in buying the same volume of goods and services.

In the year 2023 as a whole, consumption increased by €12.4bn to €136.5bn a 10% increase over 2022, however, much of this was due to price rises, and the volume increase was just 3.1%. The volume of goods increased by 2.4%, while services were up 3.6%. More cars were purchased, and travel and transport services were also up compared to the previous year.