Higher Prices Take Their Toll On Consumer Confidence

It seems that, even though the inflation rate has dropped significantly in the past few months, the fact that there was such a high rise in prices in previous months has meant that consumer confidence has been seriously dented.

This is according to the latest report by the Danske Bank, where they analysed the 3rd quarter of this year. The Consumer Confidence Index reading fell back to 128, as opposed to being 133 in the 2nd quarter of 2024.

Prices were on average 19% higher in September 2024 than they were in September 2021, which is quite a steep rise by any stretch of the imagination. Nearly 40% of the consumers that were surveyed in the Danske Bank report said that the impact of higher prices had made them less confident about their future purchasing.

Factors Include The Effects Of High Inflation & Global Risks

Talking about this fall in consumer confidence, Danske Bank Economist Hannah Martin is quoted in an article on the Belfast Live website, saying:

“We saw a drop in overall confidence in the third quarter of the year, largely driven by downward movements in expectations for personal finances and spending on expensive items over the next 12 months. Looking at the economic environment, some factors that may be influencing consumer sentiment include the lingering effects of high inflation and elevated global risks.

“It is worth noting that, despite the quarterly fall in confidence, the third quarter outturn from our index was still the second highest reading since the start of 2022 and it was also above the long-term average. This suggests that there was more caution in quarter three, but a reasonable level of confidence was still evident among consumers.”

She went on to say that:

“There is some support for confidence coming from the lower rates of inflation experienced this year, but the impact of the prolonged period of elevated price rises is still taking a toll on consumers,” Ms Martin added.

“How consumer confidence, inflation and the monetary policy environment evolve over the coming months will all be important watchpoints with regards to household spending and economic growth moving forward.”

Inflation Casts A Long Shadow

There is no doubt that inflation casts a long shadow even once the rate begins to slow down and it will take a while for consumer confidence to fully return. But the fact that the feeling of job security remains pretty high among consumers augers well for the future and if inflation continues to be kept under control I am sure that the confidence will return.