PUBLIC SERVANTS have begun to get back pay, but it is safe to say there has not been a resultant orgy of spending. Christmas is a few days away and people are out in droves. The crowds are not purchasing. Even with a late-hour rush, which can be expected over the weekend, the signs clearly point to a situation in which demand has stagnated.
This is brought sharply into focus by the latest economic bulletins from the Central Statistical Office (CSO) and the Central Bank (CB).
One the one hand, the news is encouraging. According to the CSO, there have been decreases in the index of retail prices for food and non-alcoholic beverages. Contributing to this was the general downward movement in the prices of things like Irish potatoes, white flour, onions, soya bean oil, celery, parboiled rice, table margarine, chive, ochro and cucumber.
However, the picture is somewhat mixed, as things like poultry, fish and Milo have gone up. The data for November, when compared with October, also showed alcohol and tobacco had increased.
The CB’s monetary report, released on Tuesday, paints a picture of an economy in which activity is on the rise, fuelled by a 3.8 per cent boost in the non-energy sector. The labour market has been energised, particularly in the construction, retail, recreation and service sectors, the bank suggested.
Significantly, headline inflation is the lowest it has been in years, easing to 1.3 per cent in October 2023. Food and core inflation decelerated to 1.9 per cent and 1.2 per cent respectively, on account of slower price movements in several major categories.
And yet, where is the spike in consumer spending?
Some businesses feel the pace of shopping does not compare favourably with previous years. They believe consumers are being more cautious: most are seeking bargains. Others report a stream of good spending.
This varied picture has, in fact, been the situation for a while now. If the current Christmas season is an indicator of anything, it is confirmation that spending has reached what economists might describe as a state of stagnation.
The Finance Bill passed in the Senate on Tuesday – which waived business penalties, allowed a one-time retirement lumpsum, and introduced new allowances – is unlikely to change the overall picture significantly, even if it contained measures that could help growth.
The economy may yet to have fully thawed from the effects of the pandemic, which had already come on top of years of excess liquidity. Savings had been high; they may have been depleted because of the pandemic. What is clear is wages have not kept up with inflation over the years. Higher costs are on the horizon given utility rate changes that are pending and the implementation of things like property tax.
Economists agree on the notion of stagnation, but they disagree on how to get out of it. Some say the solution is to tax wealth. Others contend infrastructure and private investment are the best ways to raise demand. What is clear: we can’t pretend the demand of the good ole days is st
