A new report shows that credit card debt has surged to its highest level in more than a year.

Statistics from the Central Bank reveal that the economy and industrial output fell by 1.5% and 5% respectively during the first three months of this year.


The newly published data from the Central Statistics Office also suggested maturing SSIA accounts are no longer having an impact on outstanding debt, as the year-on-year increase in credit card debt rose to 11.9% in May, from 7.2% in April.


However, a survey by insurance firm Genworth Financial has also suggested that one in 10 Irish households say they are borrowing more than they can afford and more than half have experienced financial difficulties in the past year. Furthermore, it reports one in three households have less than a month’s salary in savings.


According to the study, Ireland ranks second highest among 10 European countries surveyed for those reporting difficulty in paying bills and those reporting a constant struggle with finances. It also found that a mere one in four households expect their financial situation to improve this year.

The last time credit card debt was higher was in April last year when it hit a little more than 17%.

The Central Bank analysis further revealed how mortgage lending has grown at the slowest rate in 16 years. This news comes as homeowners are preparing for a European Central Bank (ECB) interest rate increase on Thursday.

Reports suggest that ECB president Jean-Claude Trichet was at a meeting of the world’s central banks yesterday at which they were urged to raise interest rates even as economic growth slows, heightening fears of a quarter percentage hike this week.

At the same time, NCB stockbrokers announced that house prices could fall by more than 40% from their 2006 peak as a result of the credit crisis, strong inflation, slower economic growth and the tightening of lending criteria.

Last week the ESRI said Ireland’s economy may be facing its first recession in 25 years as construction contracts and household spending growth eases. The slowdown has already pushed unemployment to a nine-year high of 5.4% and dragged consumer confidence to a record low.

Goodbody stockbrokers chief economist Dermot O’Leary said: “We now have official evidence that Ireland is skirting on the edge of recession. Given these trends it will be difficult for the economy to achieve any growth whatsoever in 2008.”

In a statement the CSO said gross domestic product (GDP) fell by 1.5% in the first three months of the year from a year earlier. Other figures show that Gross national product (GNP), which excludes profits of foreign-owned companies, rose by 0.8%, mainly because it did not include a drop in profits made by multinational companies.

But according to market analysts, a worsening housing market and cooling investment and exports is a contributing factor to the slowdown. Additionally, IIB’s chief economist Austin Hughes said while growth was weak in the first quarter of 2008 it was probably not quite as poor as had been feared.