The household saving rate in the third quarter of 2022 was 19.49%. This was nearly twice the long term average rate but has been slowly declining over the last year.

Saving is the difference between income and consumption, and the derived Saving Ratio of 19.49% is the saving divided by the income. Saving is given in current prices, and shown seasonally adjusted in Table 1.1 above and Figure 1.1 below. The saving level remains above its pre-COVID-19 level of around 10% but from Figure 1.1 we can see an overall downward trend since 2021-Q1. 

Households have generally decided not to wind down their lockdown savings, but rather to continue to add to wealth. Investment in non-financial assets (such as dwellings) went from €1.7bn in the third quarter of 2021 to €2.7bn this quarter. Households also paid off €0.2bn in loans rather than take out new ones, and added €2.4bn to their €145bn deposits in banks.

Household Income

Incomes of households before inflation rose slightly in the third quarter of the year. Overall household income is driven by pay to workers (D.1) and the combination of higher average pay per hour and more people in work drove up wages and salaries at current prices (not taking account of inflation). Figure 1.2 illustrates the changes in wages by economic sector in the quarter after adjusting for seasonal factors (such as higher tourism). The wage bill increased across almost all activities. Growth was highest in Public Administration, and Wholesale & Retail Trade. The only sector where compensation of employees declined was Industry, and this was a small reduction relative to the Industry total.

Higher take-home pay meant higher taxes (D.5) and PRSI (D.61) paid by households (see Table S1M, below). There was also higher investment income received (D.4, D.8) on assets such as pension fund holdings as interest rates have risen.

However, while the nominal Household Total Disposable Income (TDI) rose, prices rose at a faster rate. This meant that household income did not keep pace with inflation, and after we adjust for the rise in the cost of living, TDI declined in real terms in the quarter. 

Real TDI is estimated by first deflating the current price estimate of TDI. The deflator used is the implicit deflator of household consumption: that is, the ratio of current price to constant price Individual Consumption Expenditure (P.31). This price-adjusted TDI is then seasonally adjusted using an X-13 model, the model used for seasonal adjustment in the rest of the accounts.

Figure 1.3 shows TDI before and after adjustments.

Consumption

There was a slight increase in spending in the quarter (after usual seasonal fluctuations were taken into account): this increase was due to larger volumes of goods and services being consumed, as well as price inflation. The Retail Sales Index shows highest volume increases in Department Stores, Furniture & Lighting and Bars, while the Services Index found growth in Food Service and Other Services (such as gambling and hairdressing). However, there were lower volumes of Clothing & Footwear sold, and Accommodation and Transport services consumed in this period. In September, the Consumer Price Index showed a 3-month rise of 0.6%. The largest contributors to this increase in the cost of living were: Housing, Water, Electricity, Gas & Other Fuels; and Hotels & Restaurants.