Consumers still gloomy over prospect of recovery
CONSUMERS continue to be gloomy about the prospects for a recovery in the economy due to debt problems in the eurozone and continued Government-imposed austerity.
But the KBC Consumer Sentiment Index does show some improvement in the prospects for household finances as the threat of a eurozone interest rate rise has faded and oil prices continue to fall.
The consumer sentiment index, compiled by KBC Bank and the ESRI (Economic and Social Research Institute), dropped marginally in August.
It was down to 55.8 from 55.9 in July, a month when the confidence of consumers was affected by fears of another increase in ECB interest rates.
Three of the five main elements of the survey recorded improvements compared with last month, with consumers' view of their household finances helped by indications that further ECB rate rises are off the agenda.
Rather than a rise in eurozone rates, many economists now expect the next move to be a cut.
The assessment of consumers of the outlook for jobs also improved marginally, though the number expecting unemployment to fall in the next year are outnumbered four to one by those expecting it to rise further.
People's view of the outlook for the Irish economy weakened, however, while there was also a deterioration in the spending part of the survey. Spending intentions were at their lowest levels in two and a half years in August.
KBC economist Austin Hughes says that, overall, confidence remains lacking among Irish consumers, and their assessment of the outlook for the economy and their personal finances remains gloomy.
But he notes that the Irish consumer sentiment figure in August did not show the sharp drops seen in similar measures in the US and eurozone.
"The most positive elements of the sentiment survey in August related to consumers' views of their household finances.
"It should be recognised that last month's readings suggest consumers continue to be fairly gloomy about their own financial situation.
"However, they became slightly less negative about both the recent trend and the near term outlook for spending power."
In early August, the ECB hinted that further rate increases were off the agenda in coming months because of the downturn in the global economy.