Savings down and Investments up: Latest BoI Index dips in June

  • Sentiment towards investment tops saving for the first time
  • Greater investment activity, brighter outlook buoy investment sentiment
  • Savings sentiment weakens, lump sum savers growing disenchanted with low deposit rates
  • Risk barometer also points to modest swing toward investment and away from saving

The Bank of Ireland/ESRI Savings and Investment Index, which measures Irish peoples’ sentiment towards saving and investment hit a three month low in June with the index falling to 100 compared to 101 in May.

Savings Index

The monthly Savings Index declined to 99 in June from 104 in May driven by weaker saving patterns and a deteriorating outlook for the savings landscape. For the first time since the inception of the Savings and Investment Index, sentiment towards saving has dipped below that of investment.

The monthly Savings Attitudes Index fell to 103 in June from 107 in May 2018 due to a fall in its underlying components. 49% of people were regular savers in June, down from 51% in May with weaker regular saving patterns visible for both younger and older savers. It is likely that summer holiday spending cramped saving patterns in the month.

Peoples’ views of the savings environment darkened noticeably in June with the Savings Environment Index hitting a nine month low of 94 in June compared with 100 a month earlier. In recent months older savers have turned more negative on the savings environment and we saw further evidence of this in June. 42% of over 50s felt it was a bad time to save in June – this was the highest response for the question since it was first asked in October 2017.

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 increased to 102 points in June from 98 driven by a rise in both of its sub-indexes.

The monthly Investment Attitudes Index increased 103 index points in June from 98 in May 2018. Nearly one-third (31%) of respondents invested regularly in June, up from 30% in May. 67% of people also felt they were investing the right amount, the highest response since the question was first asked in October 2017.

The rally in global stock markets in the second quarter came to a halt in June as rising trade tensions helped push equity markets 0.6% lower in the month. Irish investors seemed to shrug the volatility off however judging by the Investment Environment Index which climbed from 98 to 101. 31% of people felt it was a good time to invest in June although under 50s were much more confident about the prospects for investment markets compared to older investors.

Additional €10k

June’s swing towards investing and away from saving also seemed to be borne out by the June responses to the Risk Barometer question where we ask people whether they would save or invest a €10,000 windfall. The percentage of people saying they would invest a €10,000 windfall rose again to 38% from 36% in April. The percentage answering that they would prefer to save fell to its lowest since December although at 62% it still indicates Irish people retain a preference for saving once off gains.

Commenting on the June results for the Bank of Ireland/ESRI Savings and Investment Index, Tom McCabe, Bank of Ireland Investment Markets said “The most interesting aspect of June’s results for the Savings and Investment Index is that for the first time in the index’ history, sentiment towards investing topped that of saving. Delving deeper, the more intriguing move came with the decline in the Savings Index. Although regular saving habits remain strong, greater numbers of older savers in particular are indicating that it is a bad time to save. To us this is clear evidence that lump sum savers are growing more disenchanted with the low deposit rate environment.”