The Central Bank released Quarterly Financial Accounts for the first quarter of 2021 yesterday that show the strength of household balance sheets improved even further than in the final quarter of 2020 as the lockdown restricted spending once again, providing consumers with yet another opportunity to save in excess.
The household debt to disposable income ratio fell to a series low of just 102% due to both an increase in disposable income and decline in household debt. Household net worth continued its upward trajectory to a series high of €883bn.
However, Goodbody Stockbrokers say that this is not reflective of the underlying distribution of wealth as it is an aggregated figure. The record level stock of savings built over the course of the pandemic accumulated an additional €1.5bn in the first quarter leaving savings 230% above their series average, to which the main contributor was a 150% annual improvement in currency and deposits. This will have provided more strength to the potential for a consumer led-recovery.
In addition, a fall in the number of PUP recipients to 157k, the lowest since the pandemic began, and a decline in the Covid-adjusted unemployment rate to 13.5% suggests the Irish economy is moving along the right path on most fronts.
According to Goodbody Stockbrokers, "Consumer spending, as measured by daily card spending, has already exhibited a substantial recovery since the reopening of the Irish economy (+16% vs pre-pandemic), so, should the excess savings pool that gained in size have spilled into the economy throughout the same period, it would imply upside risk to our own consumption forecast that stands at +7.4% for 2021."