Most households will struggle to pay for ‘cut-back Christmas’ as inflation knocks €3,000 off spending power

RAMPANT inflation will knock as much as €3,000 from the average household’s spending power this year, making for a leaner Christmas , according to research from credit unions.

he Credit Union Consumer Sentiment Index, published today, shows that 61pc of people will have less money to splash out this festive season and just 5pc reckon they will have more.

This marks a substantial deterioration compared with last year’s results, according to economist Austin Hughes, who compiles the index.

It is even worse than in 2020, when Covid was affecting the income and outlays of many households.

While a third of consumers will raid their savings to help fund their Christmas spending, a fifth say they will either borrow or do not know how they will manage to find the cash to spend over the season.

Most of the people who said they would borrow to pay for Christmas are aged between 45 and 54, while most of those who don’t know how they will fund it are under 45.

The survey, conducted earlier this month with Core Research, suggests significant numbers of people will struggle to finance even a ‘cut-back Christmas’ this year.

Mr Hughes said a rough calculation indicated that higher inflation translatesd into a hit of about €3,000 to the average household’s buying power this year.

This was draining the spending power of consumers, he said.

“With Irish inflation likely to be around 8pc this year compared with 2.4pc in 2021, consumers will find that their scope for discretionary spending at Christmas will be much reduced,” Mr Hughes said.

He said the approach of winter meant higher outlays on more expensive heating and electricity, as well as notably dearer grocery bills, and that the sense of “feel-poor” was likely to be pronounced this Christmas.

“In these circumstances, it is scarcely surprising that most Irish consumers say they will have less to spend this Christmas than last,” he said.

However, while the latest data shows that consumers remain “very nervous”, the index reading for this month was not as bad as expected given the financial challenges being faced by most Irish households.

The index reading this month is 45.3; last month it was 46.1. On a scale of one to 100, any reading below 50 indicates a more pessimistic view of the economic situation, while anything over 50 means consumers are more optimistic. “This suggests Budget support measures are having some positive impact,” the report said.

“It might also be inferred from the November reading that Irish consumers feel they have prepared themselves as far as possible for a difficult winter ahead.”

It comes as new figures reveal that Irish shoppers are expected to spend more than €18,000 every minute during the Black Friday sales, with women typically spending 66pc more than men.

New data from AIB reveals Irish consumers are expected to spend around €26 million online this Friday – 33pc more than on Cyber ­Monday, which falls on November 28.

The busiest time for spending will be between 10am and 12pm as consumers shop online during work hours. Women will typically spend 144pc more on clothing than men, while men spend 377pc more on vehicle services and sales.

There was €5,700 a minute spent on clothes alone on Black Friday last year, a 261pc increase in value compared to a normal day.

John Brennan, head of SME banking at AIB, said: “As people prepare for winter against a backdrop of cost-of-living increases, many are looking to complete their holiday shopping early and find Black ­Friday deals.”