Consumer confidence in Northern Ireland increased in the first quarter of 2019 mainly due to the strong performance of the labour market, according to analysis published today by Danske Bank.
The Danske Bank Northern Ireland Consumer Confidence Index rose to 139 in Q1 2019, up from 127 in the fourth quarter of last year but below the 142 registered in the first quarter of 2018.
Commenting on the latest figures, which are drawn from a survey of 1,000 people carried out in March 2019, Danske Bank Chief Economist Conor Lambe said:
“At a time of such high uncertainty – particularly around Brexit – we might have expected to see consumer confidence on the wane. However, our latest survey actually revealed that consumers were feeling more confident in the first quarter of the year than they were at the end of 2018.
“One of the main drivers behind this rise in confidence was the performance of the local labour market. The latest official figures show that the employment rate in Northern Ireland is at a series high, the unemployment rate is the joint lowest on record and businesses have been adding more employees every quarter since the start of 2016.
“Economic theory would suggest that this relatively strong performance should put upward pressure on earnings growth and our survey is showing that to be the case. 28 per cent of respondents said that rising wages was the factor that had the largest positive impact on their confidence levels. In addition, the part of our index that looks at how people feel about their job security posted its highest reading since the survey began more than a decade ago.”
Despite the rise in confidence, consumers still had concerns. 28 per cent of people said that the local political impasse had the largest negative impact on how they were feeling. A further 22 per cent of people pointed to the lack of progress in the Brexit negotiations in recent months as the issue having the biggest adverse impact on them, up from 17 per cent in the final quarter of 2018. And even though inflation is now just below the Bank of England’s target, rising prices were still a cause of concern for consumers. 21 per cent of people surveyed said the impact of higher prices on their household finances was negatively impacting how they were feeling.
Conor concluded: “In both 2017 and 2018, consumer confidence increased strongly in the first quarter of the year but then weakened in the following quarters. Whether a similar trend can be avoided in 2019 will likely depend on whether the labour market remains in relatively good shape, if the new political talks can lead to the restoration of the Executive and on how the Brexit process evolves over the rest of the year.”
Current financial position compared with last year
There was a rise in the part of the index focused on how consumers feel about their current financial position compared with a year ago.
Twenty-one per cent of respondents felt their financial position had improved over the past twelve months and 20 per cent felt it had deteriorated. This was relatively stronger than observed at the end of 2018.
Expectations for finances over the next twelve months
The part of the survey which examines consumers’ expectations of how their financial position will change over the next twelve months experienced a rise over the quarter and was unchanged over the year.
Twenty-two per cent of people expected their finances to improve over the next year, and 17 per cent expected their financial position to worsen.
Expectations around job security
There was a rise in the part of the index that looks at job security, with the sub-index value recording a series high.
Eleven per cent of people expected to become more secure in their job, while only five per cent expected their job security to deteriorate. The majority of people – 69 per cent – thought that their job security would remain unchanged over the next twelve months.
Across the regions, a larger number of people felt their job security would improve rather than deteriorate in Belfast, south region and west region. However, more people expected their job security to worsen rather than improve in the north region.
Expectations around spending on high value items
The part of the index that indicates the amount consumers expect to spend on high-value items over the next twelve months increased over the quarter, but fell sharply over the year.
Eighteen per cent of consumers expected to spend more on expensive items, such as furniture and holidays over the next year, but 25 per cent expected to spend less. That was relatively stronger than the final quarter of last year but, when compared with a year ago, the position in 2019 Q1 was much weaker.
Consumers’ savings expectations increased over the quarter, but fell over the year.
Eleven per cent of people expected to save more this year than they did last year, but 25 per cent thought they wouldn’t be able to save as much over the year ahead.
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