Institutional Sector Accounts Non-Financial Quarter 2 2021

In April to June of 2021 some of the restrictions that had been imposed after Christmas were lifted. Consumer spending returned to more normal levels and some furloughed employees returned to work. Seasonally adjusted, the household saving rate was 21%, down significantly on the first quarter, but still around twice the long term average rate.

This change in saving was the result primarily of higher consumer spending: as can be seen in Table 1, above, spending changed more significantly than income. Final Consumption Expenditure was almost back to its 2019-Q2 level.  While some opportunities for consumption were still restricted, the opening up of more shops may have led to releasing 'pent up demand'. There was strong growth in clothing, footwear, furniture and in cars (albeit from a low base), while supermarkets, which had been doing well under the restrictions, remained steady (see the Retail Sales Index). The Consumer Price Index shows costs of housing and utilities almost 5% higher than the spring of 2020, and a rise in prices more generally.

Workers' earnings increased in the quarter as enterprises re-opened. Total compensation of employees was above the 2019-Q2 level, the last equivalent quarter before the pandemic. Construction returned to its 2019-Q2 level while activities such as transport, retail and wholesale trade, arts and entertainment, which recovered significantly compared to 2020, remained below their pre-pandemic levels of total labour costs. 

Compensation of employees was supported by Government subsidies. These subsidies, which are paid to employers as the Employment Wage Subsidy Scheme (EWSS) and then to workers, were down on the same quarter in 2020, but total government subsidies were still more than three times their pre-pandemic levels.

The Government continued to pay the Pandemic Unemployment Payment (PUP) in the second quarter, and total social protection payments (D.62, which includes the PUP) were less than in 2020-Q2, but still more than €2bn higher than in 2019-Q2. Analysis of the administrative data shows that incomes generally increased for those not receiving the PUP or EWSS, while those in receipt of these payments generally had lower incomes than they did before the pandemic.

As household gross earnings increased, so too did their income tax (PAYE) and social contributions (PRSI). Income tax (D.5) was €1.6bn higher in this quarter than in 2020-Q2. In the second quarter of 2020, the first restrictions due to the coronavirus were in force and many businesses suspended operations. Revenue allowed businesses to defer payments of taxes ('warehousing') at that time. This significantly reduced the income tax figure for that period in 2020, and so makes the 2021-Q2 figure seem even higher in a year-on-year comparison. 

Overall then, household incomes were higher than in 2019-Q2, because salaries were higher for those who continued to work throughout the pandemic, and government intervention supported those who were not working. This elevated level of income, means that while spending returned to near the pre-COVID level, there was still more available for saving, raising the saving rate above its level before the crisis.

The largest proportion of the extra saving was added to deposits in Irish banks. Most of these deposits are available immediately to households to use as restrictions ease. Saving also went into pension funds and paying off mortgages and other loans. Capital investment (fixed capital formation, P.5) in new housing and improvement to dwellings was largely unchanged on this period last year.

The seasonally adjusted data series which includes Gross Disposable Income, Personal Consumption of Goods and Services and Gross Saving of the Household incl. NPISH sector is available on PxStat. Only the most significant transactions are shown in the table for each sector in this release. The entire unadjusted series for all variables published in this release are also available at the same link. See Background Notes for definitions of the terms used.

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