Sunday 20 May 2018

Brexit aftershock on its way out as consumers recover confidence

KBC Bank economist Austin Hughes. Photo: Gerard McCarthy
KBC Bank economist Austin Hughes. Photo: Gerard McCarthy
Charlie Weston

Charlie Weston

Consumers have recovered some of the confidence they lost when British people voted to leave the European Union.

New figures show the consumer confidence index rose in July after being hit by the Brexit vote in the previous month.

Consumers are positive about the economic prospects for the country, but also conscious of potential downsides.

Jobs announcements are making householders more optimistic.

The KBC Bank Ireland/ESRI consumer sentiment index increased to 102.7 in August, a 3.1 point monthly gain.

This reversed most of the 3.8 point drop seen in July.

The August reading is above the historic average of the sentiment series but only matches the average of the past twelve months.

KBC Bank economist said the recovery in confidence was due to the fact that consumers have realised the British vote on EU membership may not be the calamity some feared.

“The UK’s Brexit vote didn’t cause the economic sky to fall even if it made it a lot cloudier”

The absence of immediate Brexit fallout coincided with further evidence of the continuing health in the Irish economy, he added.

But Mr Hughes said the August survey hints that Irish consumers are still cautiously optimistic in relation to the outlook for the Irish economy and their own household finances.

“However, the fact that August sentiment reading merely matches the average of the previous 12 months suggests there is also a distinct absence of a broadly based ‘feel-good factor’.”

The combination of elevated uncertainty about the future and continuing financial strains suggests many Irish consumers remain unwilling or unable to significantly increase their spending, Mr Hughes said.

Daniel Foley of the Economic and Social Research Institute, who helped compile the survey, said consumer sentiment appears to have recovered somewhat after a fall in confidence following the Brexit referendum result.

“The results for the main index suggest that consumer optimism has moved back in line with its longer term trend following a brief slowdown in the last few months.”

He said improvement in consumers' expectations this month is being driven mainly by rising sentiment in relation to the general economic climate and future employment prospects.

The component relating to future unemployment increased by 9.9 index points this month reversing some of the loss observed last month, Mr Foley said.

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