Business Irish

Tuesday 22 May 2018

Consumers still optimistic, but more cautious over finances

Austin Hughes, chief economist for KBC Bank Ireland
Austin Hughes, chief economist for KBC Bank Ireland
Colm Kelpie

Colm Kelpie

Summer sales and holiday plans helped keep consumer sentiment steady last month, even if there was a more cautious assessment of household finances.

There was a small drop in numbers reporting stronger household finances in the past year, and a slight increase in numbers expecting weaker household finances in the coming year, according to the latest KBC Bank/ESRI Consumer Sentiment Index. The index stood at 105.1 in July, effectively unchanged from the June reading of 105, but that marginal increase means last month's results were the strongest since February 2016.

Although the overall sentiment index was essentially unchanged, there were some differing compositional impacts from the index of current conditions and the index of consumer expectations, said the Esri's Daniel Foley.

"Consumers appear more positive about the present economic conditions and have some reservations about future developments.

"Expectations for developments over the next 12 months were somewhat mixed, with a less optimistic view of the general economy but improving expectations on the labour market.

"This may be balancing future economic uncertainties against the strong performance in terms of job creation."

An analysis compiled by Austin Hughes, of KBC, said that the positive sentiment reading for July contrasted with weaker results for comparable surveys elsewhere, as consumers in these jurisdictions re-evaluated their situations and their prospects.

"In the case of Ireland, our sense is that Irish consumers had braced themselves for some fallout from Brexit and/or changed US economic policies, but the first half of 2017 has proven notably less traumatic for the Irish economy than may have been feared," Mr Hughes said.

While Irish consumers remained more confident about the general economic outlook and the prospects for employment in July, they were a little more cautious about their own personal finances than they were in June.

"Our sense is that this reflects limited income growth, and the perception that they are not sharing adequately in the widely heralded economic recovery," Mr Hughes added.

Irish Independent

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