Summer spending squeeze as many can’t afford to go on holiday

Many of those who can take a break said they are being forced to curb spending on their holidays.

The squeeze comes despite a slight improvement this month in the Credit Union Consumer Sentiment Index.

Close to one-third of people told researchers they cannot afford a holiday this year. A similar proportion said they will not be spending like before.

However, the inflationary spiral and high prices will not put them off taking a break, no matter how short or austere.

One in four people questioned told the researchers from Core that they will not be affected by the cost-of-living crisis when it comes to spending while on holiday.

Eight per cent said they will spend more on a holiday because they need a break to take their minds off the bad financial news.

Economist Austin Hughes, who co-ordinates the sentiment index, said the answers to the special question on holidays indicate that overall spending will be curtailed this year.

He said more people are planning to spend less compared with the numbers planning to spend more. This is a reversal of the trend in previous years.

“Not surprisingly, in the June 2022 survey, those on lower incomes were markedly more likely to say they couldn’t afford to go on holiday,” Mr Hughes said.

Younger respondents were less likely to report a difficulty in finding money to get away. However, middle-aged respondents were more likely to say they cannot afford a holiday.

Those aged between 55 and 64 were most likely to struggle to afford a break, while those aged over 65 were less likely to find it difficult, the survey indicated.

Mr Hughes said roughly two-thirds of consumers will curtail their holiday spending because of cost-of-living pressures.

“However, this implies just over one in three Irish consumers feel their financial circumstances are still sufficiently robust that they don’t plan to cut back holiday spending,” he added.

The main index results showed consumer confidence improved marginally this month.

The index, compiled in partnership with Core Research, increased to 63.7 this month from 62.4 in May. This marginal gain suggests no significant change in thinking.

Mr Hughes said the response might best be regarded as signalling a limited easing in the concerns that depressed sentiment and drove the index to a 14-year low as recently as last September.

Even though confidence was marginally better this month, consumers are still cautious.

“Sentiment has probably been boosted by tentative signs that peak price pressures may be behind us,” Mr Hughes said.

“But the survey suggests the strains are still substantial.”

The good weather may be contributing to a slight improvement in sentiment regarding holiday finances.

The June survey period saw widespread media reports of forthcoming cuts in energy costs as well as high-profile announcements of cuts in some retail food prices.

Mr Hughes said these factors were likely to have improved the mood of consumers when it comes to the prospects for their household finances.

“Consumers may sense that the pace of increase in consumer prices may be slowing, but they know it remains rapid and well above the pace of income growth for most Irish households,” he added.