Pace of Growth in Household Spending Accelerates in January

Bank of Ireland customers increased their debit and credit card spending for January, with an acceleration in the pace of household spending growth to 6.1%, up from 4.5% in December. This growth, which was broad-based across various sectors, significantly outpaced the current CPI inflation rate of 1.4%, indicating a real gain in consumption of approximately 4%.

A key highlight of January’s spending was a surge in summer holiday planning – travel agencies saw a 50% increase in sales from December, while airline spending rose by 90%. Although year-on-year growth in these categories was modest, spending on hotels and resorts increased by 4.9%.

Spending on sports clubs saw a substantial 23% year-on-year rise, reflecting ‘New Year, New You’ resolutions. However, the January sales season’s impact on retail was less pronounced, with clothing sales down 5% year-on-year, although electrical goods saw a 6.4% increase – November/December are now the most important months for sales of both these items.

Despite the January sales season not providing a significant boost to retail spending, likely due to the prominence of Black Friday and Cyber Monday sales in November and December, spending on services saw a 4.2% year-on-year increase, driven by higher expenditure on travel and other services. ATM withdrawals decreased in January by 2% year-on-year, now accounting for just 12% of total card spending, down from nearly one-third pre-pandemic.

“January’s credit/debit card data showing nominal spending growth of 6.1% is an encouraging sign, showing households’ incomes and expenditures are now growing faster than prices. Notably, cash withdrawals now account for just €1 in every €10 spent by Irish households, well down from one-third just a couple of years ago,” said Conall Mac Coille, Chief Economist, Bank of Ireland.

Looking ahead, Bank of Ireland forecasts a 3% real growth in consumer spending for 2025. “Several indicators support this optimistic outlook, including employment growth at 3.7%, a low unemployment rate of 4%, and average earnings growth of 5%, which is above the CPI inflation rate of 1.4%. Budget 2025 tax cuts, worth 2% of disposable incomes at the average wage, are also expected to bolster consumer spending”, said Conall Mac Coille.

Valentine’s Day is likely to have provided a significant boost to florists, with spending typically rising 5-6 times the normal daily average during this period. There has been a consistent decline in spending on online dating services, down 17% year-on-year in January and 43% since the peak in 2021.