Sunday 25 September 2016

Confidence among consumers has hit its highest level in over nine years

Published 01/07/2015 | 02:30

Economist Austin Hughes
Economist Austin Hughes

Consumer confidence has hit a nine-year high.

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The prospect of tax cuts, public spending increases in the next Budget and the announcement of public sector pay rises have buoyed sentiment among householders.

Consumers now increasingly expect things to get better, according to the consumer sentiment index compiled by KBC Bank and the Economic and Social Research Institute Index.

A reading of 102.8 was recorded in June, up from 98.5 in May. This is the highest level the index has reached since February 2006.

KBC Bank economist Austin Hughes said: "It seems to reflect a heightened sense of an emerging improvement in the conditions facing the average Irish consumer that has been building - albeit gradually and unevenly - for the past couple of years."

He said the most notable aspect of the index in June was that the rise was driven by consumers being more upbeat about their personal finances.

However, he warned that the nine-year high for the index should not be interpreted as a signal of unbounded optimism.

Mr Hughes said 75pc of consumers do not expect an increase in their household spending power over the next year.

"The survey suggests a broadly shared sense among consumers that the Irish economy is doing well and the outlook for jobs has improved but pressure on personal finances is still widespread," he said.

Prospects for a more generous budget in October were the primary driver of a rise in sentiment, the economist said.

"While the Irish economy is clearly improving, the sentiment data suggest the upturn is uneven and has yet to become broadly based. So, some economic arguments support stimulus measures in Budget 2016."

He said the delicate task now is to find the correct balance that spreads rather than squanders the current improvement in the economy and the public finances.

Meanwhile, a separate survey of consumers has found that the level of optimism has increased, but it is not across the board.

Many remain pessimistic according to the latest findings from the Deloitte Consumer Review.

The findings show that optimism across all categories, such as level of debt, job security, job opportunities, household disposable income, good health and well-being and children's education, has increased since September 2014 by between two and seven percentage points.

Some 19pc of respondents feel their situation with regards to household disposable income has improved, but 42pc feel that this situation has worsened.

The findings point to evidence of a dual economy emerging among consumers, said David Hearn of Deloitte.

Irish Independent

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