Consumers planning a more positive but prudent Christmas
Planning to cut back on Christmas spending is now a seasonal norm, according to analysis of the Credit Union Consumer Sentiment survey for November.
It contained a special question on consumers spending plans for Christmas, and compared it with spending intentions in the previous three years.
Over half of consumers expect to have less to spend than last Christmas while only 1 in 14 of consumers say they have more to spend.
Author of the report, economist Austin Hughes says this probably reflects a response to a sequence of negative shocks to spending capacity and accessibility over this period.
However, the responses for Christmas ’23 are less negative than last year when the full shock of the cost-of-living crisis was being felt in rapidly accelerating food and energy prices.
As a result, slightly more consumers are planning to spend more on presents (9%) than last year (7%) and a similar picture emerges in terms of a planned higher spend on entertainment (7%) against (5%).
More significantly, the proportion of consumers intending to cut back on presents (55% against 62%) and on entertainment (53% against 61%) is notably lower than in 2022.
“The impact of higher household bills through the past couple of years means there are significant demographic variations in Christmas spending plans,” Mr Hughes said. “Those aged under 35 were more notably likely to say they have more to spend this Christmas than those aged over 35. Reflecting this, under 35’s were more than twice as likely to say they will spend more on entertainment this year than older consumers and about twice as likely to say they will spend more on presents.”
He said, not surprisingly, those reporting difficulty making ends were nearly three times more likely to report lower spending power this Christmas, and twice as likely to report lower planned spending as those making ends meet with ease. Conversely those making ends meet with ease were about four times more likely to report greater spending power and increased spending plans than those with financial difficulties.
“Our sense is that while the general tone of responses to the questions on Christmas spending power and plans is still generally negative, the improvement compared to a year ago hints at resilience and, for some, increased resources,” he said.
“In turn, this might suggest that, compared to last year, a somewhat more positive if ‘prudent’ Christmas spend being planned this year.”
With the Credit Union Consumer Sentiment Survey also hinting at some improvement in the mood of Irish consumers at present, continuing good news in relation to energy prices could see the Christmas spending developing more positively than planned.
“This would imply that households but not all may have the wherewithal to enjoy some element of seasonal cheer next month,” he said.
David Malone, CEO of the ILCU noted; “The special question in the November Credit Union Consumer Sentiment Survey suggests that Christmas remains a challenging time financially and emphasises the importance of the support network provided by credit unions”.
Irish consumer sentiment edged slightly higher for a second month in November, reflecting a modest easing in concerns about the economic outlook.
Falling energy prices and growing hopes that interest rates may have peaked likely prompted this improvement, coupled with support measures announced in the Budget, some of which come into effect today, suggest strains on household finances may be less pressing this Christmas than consumers might have feared.