What do Northern Ireland's households spend their money on?

By Conor Lambe, Economist at Danske Bank

May has been an interesting month for consumer-related economic data. The Office for National Statistics (ONS) reported that UK consumer price inflation hit 2.7 per cent in April – it’s highest rate since September 2013. And real wage growth in the first quarter of this year, based on regular pay for employees in Great Britain, moved into negative territory. But despite this, consumer confidence in Northern Ireland bounced back strongly at the start of 2017, following falls in the two quarters after the EU referendum.

Much of the discussion around the short-term prospects for the UK and Northern Ireland economies in recent months has focused on the consumer. This is understandable as spending by consumers is the biggest driver of economic activity, locally and nationally. And this focus on consumers makes now a good time to take a closer look at household spending in Northern Ireland.

ONS data covering the three financial years up to 2016 reveals that, on average, households in Northern Ireland spend £502.50 per week. This is higher than in Scotland and Wales, but below the average for the UK as a whole. Northern Ireland ranks around the middle when comparing the average household’s total weekly spending across the twelve UK regions. But an examination of spending on different goods and services as a percentage of total expenditure reveals a few categories where Northern Ireland sits at the top or bottom of the regional list.

On average, households in Northern Ireland spend a larger share of their total weekly expenditure on food and non-alcoholic drinks than those in the other regions of the UK. Given the perceived notion that people on both sides of the border enjoy potatoes with many an evening meal, it is perhaps not surprising that households in Northern Ireland spend around £1.40 a week on them compared to 90 pence across the whole of the UK. But people in Northern Ireland also seem to have a sweet tooth – we spend more per week than the UK average on buns, cakes, biscuits, chocolate and confectionery products.

Northern Ireland is also top of the list when looking at the proportion of expenditure on clothing and footwear. In the UK, 4 per cent of total weekly expenditure is on clothes and shoes, but in Northern Ireland the share is 8 per cent. And Northern Ireland’s households also spend the largest percentage of total expenditure on restaurants and hotels, with the majority of spending being in restaurants, bars and on take-away food.

However, there is one area where local households rank at the bottom of the list for share of spending – housing. The ONS measures housing expenditure in a slightly different way to the other categories discussed above in order to capture those items which are not included in the headline methodology, such as capital repayments of mortgages and home improvements. These numbers only cover the financial year ending 2016, rather than three years of data. On this wider measure, housing expenditure as a proportion of the average household’s total weekly expenditure in Northern Ireland is significantly below the UK figure. Indeed, the average weekly amount of money spent on rent by renters is lower in Northern Ireland than in any of the other regions, and the average amount spent on a mortgage by mortgage holders is only lower than in our local economy in the North East of England.

The fact that housing expenditure is relatively low in Northern Ireland is well known and it is a contributing factor to the cost of living advantage that the region has over many other parts of the UK. A look at the latest house price data supports this point. In Northern Ireland, the average price of a property is over £90,000 lower than in the UK. As well as being good news for many of Northern Ireland’s households, low levels of housing expenditure could also be an advantage for local businesses trying to attract workers from other parts of the UK. Particularly in the case of young people, who may have moved to London and the South of England to study and work, but have found it difficult to get onto the property ladder in those high price areas.

The latest inflation data shows that prices are rising across the board, from food and drink to transport to recreational activities. So consumers in Northern Ireland are going to feel the pinch, but we can take some encouragement from the higher confidence levels observed at the start of this year. Given their significance to the local economy, consumer trends are something we will need to monitor closely as we move through this year.

This article was published in the News Letter on 30th May 2017.​​​

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