One in 10 households borrowed from family to pay bills

MORE THAN 20 per cent of Irish households have reported missing or delaying paying bills since 2009, and 10 per cent have borrowed money from family or friends to meet their outgoings.

The findings, in a Central Statistics Office survey examining consumer responses to the downturn, also show that almost 80 per cent of households cut back on some item of spending between early 2009 and the second quarter of last year.

The research, conducted as part of the CSO’s Quarterly National Household Survey, examined consumers’ habits in the two years preceding the second quarter of 2011. It found that spending on groceries and entertainment took the largest cuts, with more than half of households cutting their weekly shopping bills and expenditure on going out.

Savings have also taken a hit, with 45 per cent of households spending some or all of their savings and 62 per cent reducing the amount being saved during the two-year period under review.

One-fifth of households delayed or missed paying their bills in order to meet everyday outgoings, while one in 10 delayed or missed loan repayments or their credit card bill. Not surprisingly, given the difficulties in the retail sector, almost two-thirds of households have cut spending on clothing and footwear.

Club memberships, classes, health insurance and pension contributions have also been downsized, with 15 per cent dropping private health cover, for example.

The situation is unlikely to improve any time soon.

Consumer spending has fallen by 15 per cent since the recession hit, down from €95.6 billion in 2008 to about €81 billion last year.

Conal Mac Coille, chief economist with Davy Stockbrokers, expects consumer spending to continue to fall this year.

He forecasts a 1.7 per cent decline for 2012, as consumers continue to bear the brunt of declining real incomes, high unemployment and increasing VAT rates which are pushing prices up.

However, Mr Mac Coille notes that things will have to improve at some point. “It’s now so weak that it can’t continue to contract for much longer.”

Young couples with families have been hit hardest. The survey also points to particular difficulties among the unemployed.

Four out of five households where the respondent was unemployed reported cutting spending on groceries in the previous two years. Thirty per cent of these households had borrowed money from family or friends to pay for everyday items.

Half of such households had missed paying household bills, while a quarter had missed loan repayments.

To reverse the trend and boost consumer spending, Mr Mac Coille suggests that wages will need to increase once more, inflation must continue to fall and consumers must become more confident.

Employment growth could also help boost consumer spending, but Mr Mac Coille does not expect the Government’s new jobs initiative to have a dramatic impact.

“Even if 100,000 jobs are created by 2016, it’s not exactly a fantastic out-turn.”

DOWNTURN: THE SURVEY

The survey is part of a pilot series by the CSO in which it examines the impact of the economic downturn on households. In the third quarter of this year, the CSO will examine household financial distress, the findings of which will be published in early 2013 Full details at cso.ie