Financial surveys… outlook? Not great. September 25, 2013Posted by WorldbyStorm in Economy.
Not to be gloomy, but one only needs to examine the broader context to find the results of the Irish League of Credit Unions survey released this week, and reported on in the Irish Times, a bit panglossian. And truth is they’re not even that panglossian in the first place.
First up the not so bad news:
The number of people with nothing left to spend at the end of the month once all essential bills have been paid has fallen sharply since last summer. Figures published by the Irish League of Credit Unions also suggest the level of disposal income is continuing to stabilise.
What does that mean in real terms though?
The survey has also found that disposable income has increased to €172 this month from €163 in May for an average adult.
The increase in monthly disposable income for working adults has gone up from €188 in May to €205, a jump of 9 per cent.
And this is because:
Mortgage repayments, the cost of utilities and the amounts people are paying to clear credit card debt have all fallen, which accounts for much of the increase in disposable income.
Interesting, that suggests that it’s not the broader context, wage increases or what have you, that is changing but specific and personal approaches. That’s fine, to an extent. But it also suggests that those individuals are still prey to more general economic shocks should they occur. Obvious candidates for that are a failure of growth to manifest itself resulting in government having to increase taxation, or the ECB increasing interest rates (something that is an inevitability, the question only being about timing). Or, the arrival of new taxes already in the pipeline, literally in the case of water charges, and in relation to property taxes a doubling of the current level demanded. So that €9 extra in September as against May for the average adult isn’t going to go very far. And nor will that for the working adult either.
And moving on rapidly to the not so good news:
The figures indicate that the financial circumstances of many are improving, but nearly half of all adults are still struggling to pay their bills on time, with a growing number cutting back on food to make ends meet.
The Chief Executive of the ILCU argues that:
“Once again we see further and continued signs of disposable income stabilisation into the second half of 2013,” said chief executive Kieron Brennan.
But for how long?
In the SBP at the weekend there was an even less cheering piece from a survey conducted by market research company Europinions, on behalf of the newspaper’s Money Doctor, John Lowe.
According to the survey’s results, some 35 per cent of people are currently in arrears of some kind.
Credit card debt represented the biggest problem for those surveyed, with almost one-in-six currently struggling with credit card debt. Just over one-in-ten respondents to the survey said they were behind on their mortgage repayments and about one-in-eight are not up to date with their electricity bill.
Telling too were the means people used to extricate themselves from this situation:
Nearly nine out of ten of those who found themselves in financial difficulty said they had cut back on spending to improve their situation.
One-third of those who encountered financial problems in the last three months borrowed money from family or friends, while nearly half of those with money problems took money out of their savings. Consumers who responded to the survey said they had cut back their spending on a wide variety of expenses, with clothes and footwear the most popular expense to be reduced.
And some equally worrying aspects:
More than three-quarters of consumers said they had cut back on their weekly grocery shopping, with roughly the same amount saying holiday spending had been cut back. Nearly half of those surveyed said they had cut back on their use of electricity in order to reduce spending.
Again, this has implications that are all too obvious. Reduced expenditure in the economy to service debt impacts on growth. And all this before Budget 2014 and the arrival of increased and new charges outline above. All this talk of recovery is premature.