Friday 20 July 2018

Consumer confidence rises but householders not expecting budget give-away

(Stock image)
(Stock image)
Charlie Weston

Charlie Weston

CONSUMER confidence rose in September, but householders are not expecting a give-away Budget.

An improved outlook for household finances has been credited as the key driver of the monthly gain.

The repayment of water charges and increased purchasing power because of the strong euro are also contributing to the more optimistic mood.

The consumer sentiment index, produced by KBC Bank and the Economic and Social Research Institute, rose by 2.9 points in September to 105.8.

KBC Bank’s Austin Hughes said the fact that consumer sentiment recovered in September after August’s modest decline means that confidence among households remains on a positive if somewhat uneven path.

But he added: “There is little sense that giveaway Budget is expected.”

He said the monthly increase in the sentiment index of 2.9 points was not particularly large, but it was sufficient to push the September sentiment survey to its strongest level since February 2016.

The September survey suggests that consumers now see the economic glass as half full. It does not imply they see themselves at a party where the punchbowl is overflowing, Mr Hughes said.

Monthly readings on Irish consumer sentiment have been fairly ‘choppy’ in recent years reflecting the uneven nature of the economic upswing and the degree of uncertainty that surrounds developments such as Brexit.

But this year has seen a gradual unwinding of the nervousness that followed the UK’s decision to leave the EU.

The most notable feature of the September survey is the improvement in perceptions of household finances.

Mr Hughes added: "Our sense is that this was prompted by some specific developments, notably the confirmation of the looming repayment of water charges.

"Also a factor is the prospective boost to spending power caused by the strengthening of the euro against sterling and the US dollar through August."

The economist said the pick-up in consumer sentiment in September to an 18-month high is very positive.

But it doesn’t reflect any dramatic improvement in the circumstances of the typical consumer last month.

He said confidence has been trending higher, albeit erratically, through 2017 as Brexit-related fears eased because of the better-than-expected performance of the Irish economy.

The September survey suggests Irish consumers may now see the economic glass as half-full but a still uncertain environment and limited gains in incomes mean it is far from overflowing, Mr Hughes said.

Significant risks still cloud the global environment and for the average household, the ESRI and KBC Bank said.

Income gains have been limited.

Jobs growth continues to outpace wage growth even though the unemployment rate has fallen considerably.

This means the labour market improvement has been jobs intense but not felt extensively in the shape of notably faster wage growth to this point.

Online Editors

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