Confidence up but families still under pressure
Published 14/08/2014 | 00:00
CONSUMER confidence has hit a seven-year high.
But householders are still under financial pressure and are not seeing any improvement in their budgets.
Strong economic growth figures and hopes of a less severe Budget this autumn have driven the consumer confidence index to a level last seen in 2007 - before the economy crashed.
The index is now at 89.4, up from 81.1 in June, according to KBC Bank and the Economic and Social Research Institute.
The higher figure for the index in July was only marginally better than the result for June.
But the bounce in consumer confidence has reversed large losses in May.
However, when researchers drilled down to household level they found that families felt their personal finances will remain under pressure this year.
Around half of households expect their household finances to weaken.
Economist with KBC Bank Austin Hughes said overall consumer confidence was going up, but individual households do not feel they are sharing in the gains and continue to feel they are financially under strain.
Mr Hughes said families were hearing that there was now strong economic growth and they realised that exchequer returns were improving.
But at the same time, official bodies like the International Monetary Fund and the European Commission were calling for adjustments of €2bn in the October Budget. And far more households now expect their finances to weaken in the next year rather than improve.
"This result highlights the extent to which consumers feel divorced from an improvement in Irish economic conditions that for the most part they are reading or hearing about, rather than experiencing at first hand," Mr Hughes said.
Consumers shared in the pain of the downturn, but many may feel the recovery seems to be happening to other people, he found.
Mr Hughes added: "We might describe present conditions in terms of a 'two-storey' Irish economy, in which some consumers are experiencing a clear improvement in their living standards, which the remainder are hearing about while they struggle to make ends meet."
This means it is important that the Budget puts more money into people's pockets but also ensures the public finances continue to be repaired.