Almost half of Irish consumers believe the pandemic will have a lasting impact on their circumstances, according to the latest KBC Bank Ireland consumer sentiment index.
One third of those consumers expect their circumstances to improve.
The survey conducted in September included a special question intended to assess the extent to which Irish consumers felt their circumstances would be permanently affected by the pandemic.
Some 47% of consumers envisage lasting impacts on their circumstances from the pandemic, while a further 27% do not expect lasting impacts, and a broadly similar 25% say they don’t know.
A key feature of the pandemic has been the uneven nature of its impact, but a more concerning possibility is that the nature of impacts could be very different.
Consumers were asked whether any persistent impact of the pandemic on them was likely to be positive or negative. The results reveal substantial differences.
Of those consumers who said they expected the pandemic to have a lasting impact on their circumstances, a significant 23% indicated that that impact would not change their circumstances. Of the remainder, negative views predominated, with 46% saying their circumstances would worsen.
However, a substantial 32% of consumers say their circumstances would improve.
KBC Bank Ireland’s chief economist Austin Hughes said while the survey did not ask consumers to indicate why they felt the pandemic would have lasting positive or negative effects on them, he believes it is likely that changes in income and employment prospects dominate but there may also perceived changes in lifestyle or work-life balance that are seen having lasting effects.
In all demographic/income groupings, there were more negative than positive responses in relation to the expected lasting impact of the pandemic on their personal economic and financial circumstances.
However, the relative size of positive and negative responses varied widely
“Those ‘making ends meet with ease’ were notably more positive about the likely lasting impacts of the pandemic on them than those ‘making ends meet with difficulty’. In a similar vein, positive views on the persistent effects of the pandemic were also correlated (positively) with income and education levels,” Mr Hughes said.
Positive views as to the long-term implications of the pandemic were more common among those based in Dublin than elsewhere.
A sense that the pandemic would have lasting positive implications was also more prevalent among younger age groups and the balance of responses grew progressively more negative with age.
“In one respect, these differences in responses echo the reality of a concentration of job losses during the pandemic on low paying sectors and the likely persistence of permanent ‘scarring’ of income and employment prospects in such areas,” Mr Hughes said.
“While the Irish economic tide may be rising now, there is a strong sense in these results that not all boats will be lifted.”
The data also reveal a less frequently discussed implication of the pandemic. A significant number of consumers think they will enjoy a lasting improvement in their circumstances in its wake.
For some of these, it could be the result of increased demand for the goods and services they produce. For others, it may be that they have accumulated additional savings or improved their financial balances.
Mr Hughes said “Our sense is that for many others expectations of a lasting improvement in their circumstances may be due to the prospect of permanent changes in the structure of their working lives likely centred on the increased capacity to work from home. This would seem consistent with the earnings and education profiles of those giving positive responses.
“It could be that comparatively the relatively favourable responses of Dublin consumers also reflected employment and earnings profiles less threatened by the pandemic but our sense is that time gains from avoiding traffic congestion and other benefits of working from home also informed this result,” the economist said.
The survey results show substantial numbers of younger respondents expressing a negative view of the expected lasting impact of the pandemic on their personal economic and financial circumstances.
As for other age groups, this number exceeded those expecting positive impacts.
However, a perhaps surprising finding is that a somewhat larger proportion of younger age groups were more likely to express a belief that the lasting impact of the pandemic would be positive for them personally than those in older age groups.
“In attempting to explain this result, we would begin by emphasising the importance of not seeing those in young or old age cohorts as members of distinct and completely homogenous groups whose circumstances are defined solely by a single classification such as their birth date,” the economist said.
“Beyond this key caveat, it might be suggested that these responses may reflect difficulties for some in making up income losses experienced during the pandemic in a relatively short time-frame and/or in sectors where the pandemic may cast a shadow over activity for some time to come,” Mr Hughes said.
“It might also be suggested that the results could be consistent with a greater capacity sense of flexibility or mobility on the part of younger age cohorts to allow them transition to areas offering stronger post-pandemic prospects.”
He cautioned against over-interpreting the slightly surprising age-related responses to this special survey question. “However, we think the broad findings serve to underscores the importance of appreciating how uneven the lasting impact of the pandemic may prove within as well as between groupings.”
Responses to the special question in the sentiment survey seem to justify concerns that Covid-19 may have long term “scarring” effects on significant numbers. However, the survey also suggests some could enjoy a lasting Covid ‘surplus’ either in the form of increased income and/or wealth or in terms of an improved quality of life.
For this reason, it seems likely that the pandemic will widen the disadvantage deficit within the Irish economy.
“The expectation that, on balance, the pandemic will leave long term negative impacts is important both for the substance and signaling of policy settings and the need for ongoing if adapting policy support.
“That said, we also think that the significant numbers signaling expected positive long term impacts on their personal economic and financial points is a very encouraging signal of the resilience and adaptability of Irish consumers,” Mr Hughes said.