17/4/2014: Savings and Income in Ireland: ILCU new survey data

New survey from the ILCU on income and savings conditions for Irish households shows:

• 1,696,000 people in Ireland have EUR100 or less left at the end of each month once the bills and taxes are paid, up 32,000 on December 2013 figure.
• Total population of Ireland aged 15 and older is estimated by the CSO to be 3,585,400, which means that a whooping 47% of people are living on incomes with basically zero risk cushion when it comes to covering normal expenses and with no means for securing retirement savings.
• 1,154,000 live on income that delivers only EUR50 or less at the end of the month for payments and consumption over and above the necessities and number that is up 56,000 on December 2013.
• On improvement side, 470,000 people are left with zero disposable income after paying their normal bills - a drop of 10,000 on December 2013 survey.
• Another improvement is that people are increasing their savings capacity: 44% of respondents in April 2014 survey said they were in the position to save, a rise on 39% in April 2013. The above suggests that precautionary savings might be picking up again.

Details here: http://www.creditunion.ie/communications/news/2014/title,8266,en.php

Here is a recent research note from ESRI on trends in Irish savings: http://www.esri.ie/UserFiles/publications/JACB201415/RN20140101.pdf

One trend is the disconnect between savings of 21-35 year olds (up and sustained above other demographic groups) and those over 35 years old (sustained gap to younger demographic group):

And here is intensity of propensity to save:

The above shows that propensity to save in first instance of surplus income (precautionary savings-consistent indicator) is stable for older demographic, up-trending for middle-aged demographic and rising for younger demographic.

03/10/2011: ESRI Savings Index - August 2011

This is the first time I am covering a relatively new data set from the Nationwide UK (Ireland)/ ESRI Savings Index. The latest data is for August and the index shows that overall savings conditions in the country have fallen by six points in August to 105 "as divergent concerns temper attitudes towards saving".
Overall, since January 2011, volatile series have posted relatively flat trend as shown above, contrasting the constant refrain that Irish consumers are saving too much.

Per ESRI release, "divergent attitudes of the over and under 50 age groups are apparent and driving the decline of the Savings Index in August."

Specifically: the Savings Attitude sub-index fell five points in August to 94, "primarily driven by the over 50 age group who showed a more negative attitude towards the amount that they are currently able to save."

The overall percentage of people who feel they are saving less than they think they should rose by four percentage points to 56%, driven by a ten percentage point increase for those over 50s compared to no change among the under 50s. Regular saving has increased among the under 50s from 38% in July to 43% in August. Further per ESRI, "only 49% of the over 50s group think that it is personally important to save compared with 70% of the under 50s."

The Savings Environment sub-index also fell by seven points in August to 117. Significantly, 53% of under 50s believe that government policy is discouraging saving compared with 47% of over 50s.

In a commentary to the release, Brendan Synnott, Managing Director of Nationwide UK (Ireland) said (emphasis mine): “Those aged over 50, who are more likely to have accumulated savings, have a heightened concern about the impact of the wider economic environment on these hard earned resources. There is also obvious concern about potential future taxes on savings. Those aged under 50 seem to be under pressure from all sides, they are more likely to have to save regularly for things like children’s education or to make provision in the event of losing their jobs. These people need reassurance from government and more signs that things are at least stabilising, since it is still too early to think about an improvement in economic conditions.”

The precautionary motive for savings appears to remain the main driver, with the highest proportion of people surveyed, 41%, indicating that they are saving for unexpected expense with a further 12 % saving for education/training.

Debt overhang also remains prominent: "When asked what they would use any surplus funds for, 47% said they would pay off debts, including mortgages; 40% would save; only 7% would spend spare cash with a further 7% preferring to invest in a pension or shares."

As far as the 'vastness' of savings glut goes, it is nowhere to be seen. Per ESRI: "25% of consumers save between €51 and €100 a month while 24% save between €101 and €200 per month." Which means that 49% of those who save are saving less than 7.7% of the average annual income for those in employment - a rate of savings not sufficient to cover future pension needs, let alone offset potential unemployment spells, losses of earnings due to health issues, children education and other risk- and life-cycle- related expenses.

Overall, we can view savings environment as being divided into two components: actual conditions for savings today and perceptions/behavioral drivers for savings in the longer term. These are illustrated below.
Given small number of observations, any conclusions have to be drawn very carefully, but overall it appears that current environment is relatively closely linked to current index reading, while attitude to savings has little to no relationship to overall stated importance of savings.

The former might suggest that when consumers perceive the need for larger savings, they do not necessarily tend to view savings as being more important to them. In other words, the need to save more is not positively correlated with overall need to save, which may highlight evidence of robust precautionary savings motive.

The latter suggests that higher savings are relatively strongly coincident with the conditions in favor of saving in the marketplace. Which can be related to the current state of Irish banking sector where state-subsidized banks are competing for deposits by offering abnormally elevated deposit returns.