Having enjoyed a strong rebound during the first quarter of 2015 Northern Ireland consumer confidence experienced a bit of a knock back during the second quarter of the year, according to the latest Danske Bank report published today.
Danske Bank’s Consumer Confidence Index looks at the financial position of local households and their expectations for the year ahead. The latest report shows that the index experienced an eight point fall during Quarter 2, bringing it back to June 2014 levels. The index fell from 136 in the first quarter to 128 in the second quarter and all aspects of the survey experienced a setback.
Commenting on the latest movement in the Index, Danske Bank’s Chief Economist Angela McGowan said:
“Although the economy in Northern Ireland is still expanding it is possible that local confidence levels have been impacted by a number of national and local events. The outcome of the UK election and its ramifications for further austerity over the next five years could be reflected in this recent survey. In addition, the £600m black hole in Northern Ireland’s budget combined with fines from Treasury and the negative consequences of these for local public services may be starting to impact on local confidence levels.
“It remains to be seen if this is a one off blip in the index because of the UK election or the beginning of a downward trend for the region because of local public spending constraints. With clear signs of growth in the local economy there is a fair chance that the index will pick up again. Indeed, we have recently seen confidence levels in the UK falling just after the general election only to bounce back to a 15 year high the following month.”
The largest fall was in respondents’ expectations for finances and also household spending expectations, both of these indices fell by 13 points during Quarter 2.
Expectations for finances
The ‘Expectations for Future Finances’ aspect of the index fell from 165 to 152 in Quarter 2, leaving this indicator 13 points lower over the quarter and 5 points lower over the year. Although the majority of respondents (63 per cent) believed that their financial situation will remain unchanged in the next 12 months, there was a notable fall over the quarter in the proportion of people expecting their finances to get better (from 18 per cent to 14 per cent). Simultaneously there was a rise (from 14 per cent to 18 per cent) in the proportion of households expecting their finances to deteriorate in the year ahead.
Young people in the 16-22 age group remained the most optimistic with regard to their expectations about future finances and pensioners were the least optimistic. Comparing income demographic groups, ‘professional and skilled’ workers were significantly more confident than ‘semi-skilled and unskilled’ workers.
Expectations for spending
When it came to expectations for spending, there was a drop in the number of positive responses with only 14 per cent of all households expecting to spend more in the year ahead on ‘big-ticket’ items. This had fallen back from 19 per cent in the previous quarter and indeed the second quarter recorded the lowest level of optimistic responses for spending expectations since March 2013. There was also a small rise in negative responses in the latest survey with those planning to spend less rising from 22 per cent last quarter to 26 per cent in Quarter 2. Again, young people in Northern Ireland continue to be the most positive around spending expectations, while 50-64 year olds were the least confident age group.
Ms McGowan said: “Unfortunately, when confidence falls, spending is one of the first things to feel the impact. It will therefore be disappointing for local retailers if footfall starts to wane – particularly when inflation is low and real wages are finally starting to rise.”
Financial position now relative to 12 months ago
The survey saw a very small deterioration in household confidence around current finances relative to one year ago. The proportion of people who believe they are financially worse off rose from 21 per cent in Quarter 1 to 24 per cent in Quarter 2. Full-time employees were the most optimistic about their current finances relative to one year ago, but as expected, unemployed people were the most pessimistic, with a full 35 per cent believing their finances had deteriorated.
Job Security
During the second quarter confidence around job security also experienced a small drop. While the majority of people (72 per cent) believed that their job security would remain unchanged in the next 12 months, there was a decline in the proportion that believed their job situation would improve – from 9 per cent to 6 per cent. There was also a one percentage point rise during Quarter 2 in the proportion expecting their job situation to deteriorate. Higher income groups and young people were the most optimistic around expectations for job security in the year ahead.
Regional Trends
Confidence levels fell across all regions in Northern Ireland but despite a large drop of 16 points, Belfast City remained the most confident region, followed by the North West. The lowest confidence levels of 117 on the index were recorded in the North region, which includes Carrickfergus, Antrim, Ballymena, Larne and Ballymoney.
