July 2022 - Consumer Mindset
The Irish Consumer Sentiment Index, conducted by Core Research and overseen by economist Austin Hughes, took a further hit in July and stands at 53.7. This is the indexes lowest level in 21 months. This report explores some of the key reasons why consumer sentiment remains low.
“After a surprising but short-lived bounce in the June reading, Irish consumer confidence took a further significant hit in July. Although the drop was broadly based, the weakening was most pronounced in those elements of the survey focussed on consumers personal finances circumstances.”
For the past two summers, people have been day dreaming about ‘restriction-free’ holidays, socialising and moments of entertainment and culture. While much of these experiences have now returned and have been embraced by many, people are facing new restrictions on their life, in the form of limited budgets.
Inflation is squeezing people’s spending power and while airports are busy, and holiday destinations in Ireland are full, the next few months will see people balancing their pent-up demand for leisure and social activities with budgeting for household necessities.
Inflation Influencing Consumer Mindset.
On 1st July, Electric Ireland announced it will increase residential gas and electricity bills again, and this was deemed the most significant story that resonated with the Irish public. 73% of people believed this was another important development in the inflation story.
This high level of engagement with ‘inflation’ news is also informing how people feel about the short-term economic outlook.
64% of people say they are very or extremely concerned about inflation, and only 21% of people are optimistic that we can overcome the situation.
As a result, the nation is now managing their household with limited budgets, prepared for further future uncertainty.
Balance of Leisure and Necessity.
Since COVID-19 restrictions have been lifted, there has been a sustained return to pre-pandemic levels of leisure activities, but there has not been a boom as many had previously predicted. This is purely down to the new balance which consumers are now managing, enjoying our post-Covid ‘freedoms’ with squeezed budgets.
While 60% of people say spending time with friends and family in July 2022 is a ‘very important’ area of their life, 66% of people say the rising cost of energy and fuel is now ‘very important’ to them, an increase from 53% in June. As a result, the public claim to want to spend up to 56% less on restaurants and cafes, and 42% less on travel and holidays in the coming months.
While 60% of people say spending time with friends and family in July 2022 is a ‘very important’ area of their life, 66% of people say the rising cost of energy and fuel is now ‘very important’ to them, an increase from 53% in June. As a result, the public claim to want to spend up to 56% less on restaurants and cafes, and 42% less on travel and holidays in the coming months.
Pressure is on the Government.
As the public begin to work harder to manage their budgets heading into the Autumn, there is now increased pressure on the Government to address the cost of living. While the public expect private providers to reduce the cost of non-essentials (recreation, and entertainment), the public expect the Government to support on energy costs, housing and childcare.
For renters, it is not new news that the cost of living is a challenge as there has been inflation consistently for those renting in recent years, but as politicians head back to holidays in their constituencies, there will be pleas for financial support from people who are expecting mortgage repayments, energy and car fuel costs to increase over the coming months.
Balancing Budgets, Sentiment & Expectations.
As we head into the second half of the year, there will be a need to balance delicately the expectations of consumers with reality. The public is now at a point where they believe there is only so much they can do to combat inflation and will expect both the Government and private providers to do more to support their limited budgets.
This winter, with low public optimism, there will be a need for brands to demonstrate they understand the challenges facing consumers.
