Savings and Investment Index shows climate change is fastest growing concern

Bank of Ireland’s Savings and Investment Index in Q3 2023 shows that climate change is the fastest growing concern, with almost a quarter of households (23%) now citing it as their number one worry, almost double the level seen in Q4 2022. While inflation continues to be the dominant concern (30% of households), it has dropped slightly from its high of 33% in February.

Concern over the cost of housing and rent (15%) remains high, especially amongst those in their 30’s, but this has dropped from a high of 19% in Q2 of this year. 8% of consumers feel that a global recession is their top concern, half the amount that highlighted it in Q4 2022. 5% say the effects of artificial intelligence are their top concern, a new element being tracked this quarter.

Table 1: Top concerns amongst Irish consumers over past year

Kevin Quinn, Chief Investment Strategist, Bank of Ireland commented: “Throughout 2023 inflation has remained at the top of the list of concerns. However inflation in Ireland and across Europe has been falling – by September it had reached 6.4%, down from last year’s high of 9.2%. Clearly it remains the single biggest issue impacting households, although it is noticeable that our survey showed it continuing to drop. The surprise this quarter was how many households now consider climate change as the single biggest concern – with almost one in four citing this as their biggest concern – perhaps driven by the extreme weather during the summer. This trend is also reflected in the approach many households are now adopting with their investment plans, as interest in environmentally aware investing grows”.

Savings rates increase but attitudes weaken

The latest survey shows that household attitudes to the savings environment continue to evolve. CSO data for the country indicates that there has been a modest rise in those saving in the first two quarters of 2023, with 12% saving in Q2 2023, after seven consecutive declines since the pandemic peak of 28% in Q2 2021.

In contrast attitude to savings has continued to weaken in Q3, as inflation remained so prominent amongst consumers concerns. The overall savings environment index dropped to a new low (65, from 69 in Q2) as too did people’s attitude to whether it will be a good time to save in the coming six months (67, from 73 in Q2).

Attitudes to investing also fall

Attitudes to investing, which had been relatively stable in recent quarters, also saw a drop in Q3 with the investment index dropping to 69 from 74 in the previous quarter. While stock markets made considerable gains up until the middle of the year, with global equities up by over 14% by mid-September, there has been a drop in values since as markets reacted to interest rates being held ‘higher for longer’ as well as, more recently the conflict in the Middle East. By late October the global equity market was up just over 7% and the global bond market had dropped by 2.3%.

“The first half of the year saw surprisingly strong gains for investors in the stock market – largely driven by the gains made by the largest technology firms who were seen to be the big winners from the emergent boom in artificial intelligence. In contrast, the second half of the year has been more challenging, and this has perhaps been behind a drop in investor confidence in our survey. Added to this higher prices have squeezed incomes for many households making it harder to consider longer term investing.  Equity markets are having to adjust to the prospect of interest rates remaining higher for longer and more recently to the risks associated with conflict in the Middle East. It is also set against an environment in which the US economy is proving a great deal more resilient than had been thought. Where all of this has been most apparent is in the changes in the bond market with yields reaching levels not seen in the past 16 years. For cautious investors this makes the potential returns on offer from lower risk investing much more attractive in the years ahead,” said Kevin Quinn.