The Bank of Ireland/ESRI Savings and Investment Index, December 2017

• Overall decrease driven by lower investment levels and weaker sentiment towards saving
• December data shows that over 50% of consumers are saving
• Seasonal spending slows down investment

The Bank of Ireland/ESRI Savings and Investments Index, which measures sentiment in Ireland towards savings and investments retraced some of its big November gain in December, finishing at 102 points compared with 103 the previous month. The overall change was driven by lower investment levels and an easing in sentiment towards the future savings and investment environment in the first half of 2018.

Savings Index

The monthly Savings Index decreased to 103 points in December from 104 in November. The monthly Savings Attitudes Index, which asks people about their saving behaviour and how they feel about the amount they save, was unchanged with 53% of people saving regularly in December indicating that saving attitudes remain strong.

In contrast, the Savings Environment Index, which explores households’ views on the environment for savings, decreased by 3 index points to 98 in December. The underlying three month moving average trend for this Index has moved up by 11 points versus a year ago so it is possible that December’s fall is temporary. However, it may be an early indicator that savers are beginning to look for higher returns for their funds. This finding resonates with the results from the December Risk Barometer survey which found a greater openness to investing versus saving.

Investments Index

Like its savings counterpart, the Investment Index measures peoples’ attitudes towards investing and how they view the investment environment. Irish peoples’ willingness to invest remained resilient in December with 34% of people answering that they invested regularly compared to 31% in December. Investment activity was more prevalent amongst younger people with 39% of under 50s regularly investing compared to just 26% of over 50s.

However the amount people said they were investing in December was lower – 63% felt they were investing the right amount in December (compared to 67% in November) with 21% answering they invested nowhere near enough, up from 16% the previous month. It is likely that Christmas was a factor behind this result.

The Investment Environment Index registered a second consecutive decline in December with people indicating lower expectations for the investment climate as we move further into 2018. This was surprising considering markets’ strong performance in 2017 (world stocks gained 8.9% for euro based investors) and the fresh investor impetus provided by the US tax cuts in December. Rather than indicating growing pessimism on the investment outlook in 2018, recent readings for the index may just point out that people feel it will be a challenge to reproduce strong returns again this year.

Risk Barometer

This Risk Barometer asks households how they would consider using a windfall gain of €10,000. The December survey still confirmed that Irish people retain a heavy preference for saving with nearly two thirds saying they would save some of this windfall. However, a higher proportion of people said they would invest (47% compared to 41% in October), suggesting that people were more open to considering investments.

Press release:

Commenting on the Bank of Ireland Savings and investments Index, Tom McCabe, Global Investment Strategist, Bank of Ireland Investment Markets said: “Irish sentiment towards savings and investments eased in December mainly as a result of a weaker outlook for the saving and investment environment. December’s decline in the savings environment index may be temporary given recent trends in the index but it could also be an early indication that savers are looking for better returns on their money and are willing to consider alternatives to their savings account."

“The investment environment index also slipped back in December which was surprising considering strong market returns in 2017 with world stock markets up 8.9%. Looking at the levels of investment, it is likely that Christmas was a considerable factor in the December dip as over one-fifth of respondents felt they invested nowhere near enough in December. With consumers choosing to spend their cash on what was previously earmarked for investment, it could be the case that the mind was willing but the wallet was weak!”

About the ESRI/Bank of Ireland Savings and Investments Index:

The Bank of Ireland/ESRI Savings and Investment Index tracks household attitudes towards savings and investment as well as monitoring their perspectives on the current and future savings and investment environment. Understanding savings behaviour provides insight into how households smooth consumption, plan to make big purchases and build up buffers which can be drawn down in times of economic stress. Monitoring household investment patterns gives an understanding of how they are putting their money to work, their financial diversification, and their appetite for risk. The Bank of Ireland/ESRI Savings and Investment Index also provides a Risk Barometer and a Retirement Optimism Index to give insight into household risk taking and retirement planning. These will be presented on alternate months.

The Bank of Ireland Savings and Investment Index is produced monthly from a minimum sample of 800 consumers aged 15 years and above. The ESRI carries out the Savings and Investment Index research to ensure the indices represent a national sample.