Spending power increase pushes confidence to a 10-year high
The recovery is becoming more 'real' to consumers as it is now delivering more jobs and, after a lot of pain in recent years, some improvement in household spending power
THE confidence of householders improved last month to push sentiment to a 10-year high.
A stronger jobs market and greater household spending power were behind the optimism.
Even though the rise in the consumer sentiment index in December was marginal, it was enough to push the reading to its highest level in a decade.
The KBC Bank/ESRI consumer sentiment index rose to 103.9 in December, from 103.1 the previous month.
This was the strongest position since January 2006.
But the limited monthly change suggests the average consumer is not seeing any dramatic improvement in their financial circumstances, according to KBC Bank economist Austin Hughes.
The rise in December was the third monthly gain in a row. Mr Hughes said the index was now on a path of steady, if modest, improvement in recent months.
He said: "The fact that the monthly improvement in sentiment was fairly modest suggests that there hasn't been any dramatic change in the environment facing Irish consumers of late."
But he said the fact that the sentiment index had posted a new 10-year high emphasised that consumers felt their circumstances, and those of the broader Irish economy, have been steadily improving.
"The recovery is becoming more real to them as it is now delivering more jobs and, after a lot of pain in recent years, some improvement in household spending power," he said.
The prospect of Budget measures feeding into stronger incomes, combined with lower oil prices and aggressive price discounting by retailers, has made Irish consumers more confident about their spending power.
However, caution born of recent pain and continuing pressures on many household finances, together with a still very uncertain global outlook, meant the Irish public remained some considerable distance from any broadly based 'feel-good factor' among consumers, Mr Hughes said.
Economist with the Economic and Social Research Institute (ESRI) Denis Foley said consumers were still cautious about their personal financial situation, even if they were more optimistic about the health of the economy. "There were improved perceptions of the outlook for the labour market and economic conditions over the next 12 months. However, consumers were more cautious in December about their personal financial situation 12 months from now."
Mr Foley said householders felt more confident about making decisions to buy large household items such as fridges and cookers.
The higher levels of consumer confidence come as a record increase in Irish online shopping fuelled a 6.6pc year-on-year jump in consumer spending last month, according to a report from Visa Europe.
Visa said its consumer spending index showed e-commerce spend was up a record 16pc on December 2014.
Face-to-face expenditure also rose, but at a lower rate than last year.