Consumers worried about lack of spending power
Published 05/06/2015 | 02:30
Consumers are continuing to feel optimistic about the outlook for the economy and jobs but they are a little more cautious about their household finances.
The KBC Bank/ESRI consumer sentiment index slipped fractionally to 98.5 in May from 98.7 in April.
KBC Bank economist Austin Hughes said small changes of this sort aren't statistically significant and as such it is more correct to say that Irish consumer sentiment held broadly steady last month.
The underlying trend as suggested by the three month moving average of the series continued to edge higher in May - from 97.6 to 98.4.
"At current levels the sentiment index is pointing to a fairly healthy upturn in the economy as a whole," Mr Hughes said.
But he warned that consumers remain concerned about a lack of improvement in household spending power. "This implies that from the perspective of the average Irish consumer the recovery is a case of two steps forward and one back, rather than a widely shared 'feel-good' factor that is driving marked gains in confidence and consumer spending," he added.
Mr Hughes said consumers would need to see "a more tangible improvement in their own financial circumstances, or at least a very real prospect that this will occur before long" in order for there to be a further increase in optimism.
Of the five main elements of the Irish consumer sentiment index, three posted monthly declines. The three components that declined relate to consumers' financial circumstances and spending plans, while the two that improved relate to the outlook for the economy and for jobs.
He said he cannot be sure exactly what caused consumers to be a little more downbeat about their personal finances in May, but several possibilities suggest themselves.
"It could be the case that the roll-out of water charge bills served as a painful reminder of continuing pressures on household spending power.
"The ongoing recovery in oil prices might also have played some role as could significant increases in some elements of their living costs of late such as motor insurance.
"Finally, it might be that those consumers who are renting are also increasingly concerned by what may seem to be a relentless rise in accommodation costs."
The KBC Bank economist said the overall figures did not signal any dramatic change in consumer thinking.
But he emphasised the "persistent divergence" between the challenging conditions experienced by Irish people and the positive news they are hearing about the broader economy.