Dáil Éireann Debate, Thursday - 16 June 2022
39. Deputy Neale Richmond asked the Minister for Finance the measures that he believes are contributing to the decrease in consumer spending to date in 2022; the steps that he will take to address this and the rising cost-of-living; and if he will make a statement on the matter. [31067/22]
Amharc ar fhreagra43. Deputy Fergus O'Dowd asked the Minister for Finance his views on the slight decrease in consumer spending in quarter one 2022; the possible reasons for same; and if he will make a statement on the matter. [31334/22]
Amharc ar fhreagraI propose to take Questions Nos. 39 and 43 together.
A decline in consumer spending was recorded in the first quarter of this year, reflecting numerous headwinds at the start of the year. Firstly, there was the Omicron wave and its impact on hospitality and certain other contact-intensive services sectors in the early part of the first quarter. Then as the economy fully re-opened we were faced with the fallout from the war in Ukraine, which led to a collapse in consumer sentiment due to the heightened uncertainty and a further rise in inflationary pressures. All of this is reflected in an increase in household precautionary savings, with households saving around a fifth of disposable income in the first quarter, a rate not seen since the second quarter last year.
The war in Ukraine and the associated economic and financial sanctions represent a large ‘supply-side’ shock to the world economy, with the main channel of transmission from the war to the Irish economy coming via the sharp rise in energy and other commodity prices. Inflationary pressures have risen steeply as a result.
Consumer price inflation in Ireland rose to 8.3 per cent in May, a multi-decade high. Core inflation has also been increasing sharply in recent months, suggesting price rises are becoming more broad-based, with a greater range of consumer goods affected.
I am acutely aware of the real hardship this inflationary pressure has created, with both businesses and households feeling the strain. Rising prices ultimately reduce the real incomes of households and result in households cutting back on spending.
The Government has introduced a series of measures to ease the impact of rising prices, with €2.4 billion in announced cost of living measures so far, including measures announced in Budget 2022. We will continue working to ensure the fallout is minimised for those who are least-equipped to respond, although we cannot cushion the impact for all. It is crucial that we remain prudent in our response, and avoid a situation where broad fiscal measures contribute to further inflationary pressures.
