Inflation and war: 42% of consumers worried about everyday bills

While 42% of consumers believe it’s a good time to save, confidence about retirement dips and 42% express concern about everyday bills.

Bank of Ireland’s Savings and Investment Index made a strong recovery in Q1 2022, with a 9% increase bringing it to pre-pandemic levels.

The Index was 96 in February 2022 compared to 87 in November 2021 when it plummeted as the Omicron wave hit.

“The war in Ukraine and the impacts on the likes of energy prices and food prices suggest that these concerns will remain prominent in the months ahead”

As the pandemic recedes, attitudes to savings are normalising, but worries about inflation are rising. 42% of consumers say it is a “good time to save now” compared to 38% in February 2020 before the pandemic hit. However, the level of concern people express about jobs, paying bills and other day to day worries has become more elevated.

Inflation bites

42% of people expressed a concern about every day bills compared to 35% in November ’21, which is higher than any point in the pandemic. By contrast concerns about family health continue to trend downwards with 62% still concerned, but this compare to 75% back in May 2020. 

During the pandemic period, the Savings Index had risen considerably reaching a high of 110 in March 2021. Since then it has trended down and dropped significantly in Q4 ’21, as a Christmas spending splurge looked likely, while attitudes to saving now seem to have normalised to pre-pandemic levels.

Discussing the trends, Kevin Quinn, chief investment strategist at Bank of Ireland said: “Despite interest rates being near zero, we are seeing attitudes to savings returning to pre-pandemic levels.

“However, our survey results suggest that there is a high level of concern about day to day bills, suggesting that there is a heightened concern growing about the impact of inflation. The war in Ukraine and the impacts on the likes of energy prices and food prices suggest that these concerns will remain prominent in the months ahead.”

Confidence about retirement dips again

The Retirement Optimism Index saw a significant drop in the February survey falling to 109 from 118 in November ’21.

When asked about how comfortable they expect to be in retirement, the survey showed a drop from 125 to 112, perhaps reflecting that increasing inflation and economic concerns were making them feel less certain about their finances and long-term retirement plans.

When asked about their main worries, concerns about a new wave of Covid have decreased to 53% from 74% in November, and some distance from its August 2020 peak of 88%.

“The findings in February show another period of considerable change in attitudes,” Quinn said.

“While people remain very concerned about family health, the evidence of the survey is that the pandemic is fading slowly from the public mind which is very understandable given the removal of restrictions and a return to more normalised living. There is little doubt that inflation is replacing Covid as a prominent concern and this is weighing on the Retirement Index. I expect that this will become even more pronounced as the effects of the Ukraine war are felt in the price of energy and food in the coming weeks.”

Ukraine war knocks investor confidence

While it’s important to clarify that this survey took place prior to the Russian invasion of Ukraine, the Investment Index rebounded from the lows seen late last year, with an increase to 95 last month compared to 88 in November ’21.

Attitudes to investing improved slightly, recovering to an Index level of 99 compared to 97 in November.

There was also a higher incidence of people investing (up to 122 from 116 in November ’21), and a significant increase in the number of people who don’t believe they are investing enough (a new low of 75 from a pandemic period high of 90).  There was also a jump in the number of people seeing the environment of 6 months’ time as a good time to invest (up from 82 in November ‘21 to 97 in February ‘22).

“The investment market has been volatile in early 2022 with the twin effects of changes in central bank policy and the Ukraine war both leading to a market correction,” Quinn said.

“This research, which took place before the war in Ukraine started, showed a stabilisation in attitudes to investing and a significant increase in the proportion of people who don’t believe they are investing enough. I suspect that there is a growing recognition amongst some consumers that it’s no longer enough to save given near zero interest rates. Many are looking elsewhere for their longer term plans, especially in the face of inflation concerns.”

John Kennedy
Award-winning editor John Kennedy is one of Ireland's most experienced business and technology journalists.