The bank’s quarterly Consumer Confidence Index fell to a reading of 128 in quarter three, down from 133 in the second quarter of the year. However, this was still above the 112 recorded at the same time in 2023, suggesting there was still a reasonable level of confidence among the general public when compared to recent years.
The findings are based on a survey of 1,000 people from across Northern Ireland in September 2024, which showed confidence about current and future finances both declined over the quarter. People were also less confident in relation to their plans to make a big purchase over the next 12 months, such as a holiday or new furniture.
Just under two fifths (39%) of respondents said the impact of higher prices on household finances was the main factor that made them feel less confident. While the rate of inflation has slowed this year, looking over a longer time period shows that in September 2024, prices were on average 19 per cent higher than in September 2021.
Global risks – including the war in Ukraine and events in the Middle East – had the largest negative impact on confidence levels for 15% of those surveyed, while 14% cited higher interest rates as having the biggest negative impact on sentiment.
Danske Bank Economist Hannah Martin said: “We saw a drop in overall confidence in the third quarter of the year, largely driven by downward movements in expectations for personal finances and spending on expensive items over the next 12 months. Looking at the economic environment, some factors that may be influencing consumer sentiment include the lingering effects of high inflation and elevated global risks.
“It is worth noting that, despite the quarterly fall in confidence, the third quarter outturn from our index was still the second highest reading since the start of 2022 and it was also above the long-term average. This suggests that there was more caution in quarter three, but a reasonable level of confidence was still evident among consumers.”
Danske Bank’s report showed that confidence around job security, which tends to have a more muted response to economic developments compared to other measures in the index, improved in the quarter.
While 57% of people thought their job security wouldn’t change, 17% expected to become more secure in their job, compared with only 7% who thought their job security would worsen.
Some 42% of respondents said their financial position had worsened in the previous 12 months, compared with 27% who saw an improvement, and while 31% expected their financial position to improve over the year ahead, 28% expected to become worse off.
Only 20% of consumers said they expected to spend more on expensive items in the year ahead, with 43% expecting to spend less. Just over a quarter (27%) of those surveyed said they expected to save more this year than they did last year, compared with 29% who thought they would save less in the year ahead.
“There is some support for confidence coming from the lower rates of inflation experienced this year, but the impact of the prolonged period of elevated price rises is still taking a toll on consumers.” said Hannah Martin.
“How consumer confidence, inflation and the monetary policy environment evolve over the coming months will all be important watchpoints with regards to household spending and economic growth moving forward.”
