Bank of Ireland/ESRI Savings and Investment Index: Saving sentiment jumps as Investment sags

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  • Saving sentiment rises as older savers in particular turn more positive on the outlook for returns
  • Lingering global uncertainties weigh on investors’ outlook for markets
  • Retirement optimism yo-yos lower as concerns around financial comfort in retirement re-emerge

The Bank of Ireland/ESRI Savings and Investment Index, which measures Irish peoples’ sentiment towards saving and investment was unchanged at 100 in July 2018 as improvements in sentiment towards saving offset softer investor confidence.

Savings Index

The monthly Savings Index increased to 102 in July from 99 in June, driven by a big rebound in the Savings Environment sub-index from 94 to 100. The most interesting aspect of the July increase in this sub index was a big improvement in sentiment among older savers that typically have larger lump sums for saving. For example, the percentage of over 50s that felt it was a good time to save hit 41% in July, the highest response since the question was first asked in October 2017. The ECB’s recent comments around potential increases in interest rates from mid-2019 onwards probably boosted savers’ outlook for returns.

Regular savings patterns remained strong in July with 50% of people saving regularly, up marginally from 49% in June. However people were less happy with the amounts they were saving – 47% of people felt they weren’t saving enough in July, leading to an unchanged reading of 103 for the Savings Attitudes sub index.

Investments Index

Like its savings counterpart, the Investment Index measures peoples’ attitudes towards investing and how they view the investment environment. The monthly Investment Index fell to 97 points in July from 102 in June, driven by falls in both the Investment Attitude and Environment sub indexes.

The Investment Attitudes sub index fell to 97 in July from 103 in June. The percentage of regular investors rose slightly to 32% but people were less happy with the amounts they were investing in July. The percentage of people that weren’t investing as much as they would like jumped to 41% in July, the highest response since the index launch and up from 31% the previous month. This was the main cause of the fall in the Investment Attitudes sub index.

The Investment Environment sub index also dipped from 101 to 98 in July, a slightly surprising result considering world stock markets rose 2.8% for Irish investors in the month. Generally Irish people are still of the view that it is a good time to invest but confidence sagged slightly in July, probably as a result of ongoing trade tensions between the US and China.

Retirement

Irish peoples’ views on retirement have yo-yoed in recent months. In July the Retirement Optimism Index fell back sharply to 94 compared with 104 in May.

The most striking decline was in the number of people who felt they would be able to live comfortably in retirement from a financial point of view. The percentage who felt they would find it financially difficult jumped to 44% in July, the highest response since the question was first asked in November 2017.

Commenting on the July results for the Bank of Ireland/ESRI Savings and Investment Index, Tom McCabe, Bank of Ireland Investment Markets said:

July was a contrasting month for the subcomponents of the Bank of Ireland/ESRI Savings and Investment Index. The drift lower in investment readings had a feel of ‘sell in May and go away’ about them as we moved into holiday season.

Savings sentiment improved sharply though, driven by greater optimism among older savers who tend to save larger amounts. Recent ECB comments on possible interest rate changes may have fed greater optimism on deposit rates among these savers. It remains to be seen whether this marks a real turning point in savers’ confidence around what they can earn over the next few years.

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