Institutional Sector Accounts Non-Financial and Financial 2019

Household total gross disposable income increased by over €7bn in 2019 and at the same time household final expenditure on goods and services (P.3) increased by €5.5bn. As a result the gross saving of households (B.8g) continued to grow. Over the past four years the growth in incomes has been out-pacing the growth in consumer expenditure, and this has driven up the saving ratio. Expressed as a percentage of total disposable income the corresponding gross saving ratio was 11.6% in 2018 and 12.2% in 2019. Figure 1.2 shows actual gross disposable income, final expenditure on goods and services and the saving ratio for the household sector for the period 2010 – 2019. Also included in Figure 1.2 is the EU saving ratio. In Ireland between 2010 and 2016 Ireland had a volatile saving ratio well below that of the EU-27. In recent years, this volatility has given way to a more stable series that is close to the rate for the European Union as a whole.

Household and NPISH Debt

The balance sheet position in relation to household and NPISH debt (Table 2.4 Liabilities – AF.4 Loans) continued to decrease from a peak of €203bn in 2008 to €132bn in 2019. The resulting debt to income ratio for this sector, which measures the sustainability of household debt, decreased from 121% in 2018 to 112% in 2019. For the Euro area as a whole, debt to income was 94% in 2019.

Figure 1.3 charts the movement in income and debt for the period 2001 to 2019 together with the ratio for Ireland and the Euro area.

Use of Household and NPISH Saving

Gross household and NPISH saving (B.8g) climbed to €14.5bn in 2019 from a low of €7.7bn in 2014. The use of saving in this sector is dominated by capital investment in dwellings and related financial transactions in loans and deposits. How households and NPISH have been using their saving is illustrated in Figure 1.4 below. The line graph is the trend in gross household saving while the bar chart illustrates transactions in investment and borrowing by households and NPISH^[1].

Total transactions in loans by households were near zero in 2019 (-€0.3bn). The repayments of principal on earlier borrowings was around the same as the total of new loans being taken out (Table 2.2 - Liabilities F.4). The new loans are mostly mortgages to buy new homes: gross capital formation stood at €7.3bn in 2019. The repayments of principal are on loans taken out over recent decades: gross capital formation peaked at €25.8bn in 2006.  Normally households invest significantly more in homes and other tangible assets than they put on deposit, but in 2019, for the first time deposits were at the same level as fixed capital formation. Households also put money aside as investment in insurance and pension funds of €2.6bn (Table 2.1 – Assets F.6).

 ^[1]It is important to make the distinction between balance sheet measures of household debt, i.e. the outstanding stock of loans illustrated in Figure 1.3 and transactions in loans, i.e. increases (+) or decreases (-) included in Figure 1.4.