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Consumer confidence in steep decline as concern over soaring prices rises

Danske Bank survey reveals half of population expecting fall in finances


Conor Lambe

Conor Lambe

Conor Lambe

Half the population is reporting a deterioration in their finances over the last year, with the same percentage expecting this to continue in the next 12 months, according to the latest survey of consumer confidence.

Confidence declined sharply in the second quarter as increasing inflation and higher prices continue to hit people’s pockets, the latest analysis by Danske Bank reveals.

The index decreased to a reading of 103 in the second quarter of 2022, down from 117 in the first quarter and significantly below the reading of 149 posted in the second quarter of 2021.

Respondents to the June survey reported feeling less confident about their current finances, future finances, job security and expected spending on expensive items.

Asked what factor had the largest negative impact on their confidence levels, 47% said higher prices, 13% claimed global risks, including the war in Ukraine, and 12% said post-Brexit trading arrangements.

On finances, 20% felt their financial position had improved over the previous 12 months, but more than half said they had deteriorated. Again, 55% believe their finances will worsen in the next 12 months, with 19% expecting them to improve.

Danske Bank chief economist Conor Lambe said the rate of inflation hit a multi-decade high of 9.4% in June, when the survey was conducted.

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“This high inflation was the largest driver of the fall in consumer confidence and, looking forward, it’s likely that consumer price inflation will rise even higher with price pressures further up the supply chain also at elevated levels,” Mr Lambe said.

“Given the higher prices currently being experienced and the expectation that inflation could move even higher, it’s likely that consumer spending in Northern Ireland and the wider UK will become increasingly squeezed.

“As such, the performance of the overall economy is expected to soften as we move through the remainder of 2022 and into 2023.”

Forty per cent of consumers told Dankse Bank the adjustment to living with Covid-19, with less restrictions, had a positive impact on confidence. A further 20% were unsure as to what was making them feel more positive while 5% of people said they were boosted by overall performance of the local economy.

In terms of spending, 22% expected to spend more on expensive items over the next year compared with 49% spending less.

On job security, 13% of people expected to become more secure in their job, 60% of respondents felt it would remain unchanged and nine per cent think it will worsen.

Analysts Springboard, in its latest report on retail footfall, note there is a growing north-south UK divide on numbers post pandemic returning to high streets, shopping centres and retail parks.

Footfall across the board is still far below numbers seen before the early 2020 outbreak.

July footfall in Greater London was 27.4% above the same time last year, but only 7.2% here, 8.9% in North & Yorkshire and 9.2% in Scotland.

Overall, footfall weakened in July to 14.2% below 2019 from 12.3% in June 2022. High streets and shopping centres recorded the worst numbers —  down 17% and 18.6% respectively.

“As importantly, it became clear that a north-south divide is emerging in terms of the recovery in footfall, indicating the impact of the proportionately greater burden of inflation,” said Diane Wehrle, Springboard’s director of marketing and insights.