Wednesday 24 October 2018

Consumer confidence falls as Budget disappoints

(stock photo)
(stock photo)
Charlie Weston

Charlie Weston

Disappointment with the small size of giveaways in the Budget has left consumers feeling underwhelmed.

This prompted a drop in consumer sentiment last month, new figures show.

Consumers are cautious about their household finances, and were disappointed with size of giveaways in the Budget, new Consumer Sentiment Index figures show.

The KBC Bank/ESRI index fell to 104.8 in October, down marginally from the reading in the previous month.

Economist with KBC Bank Austin Hughes said: “Household finances were downgraded following September gains, possibly reflecting reduced expectations of Budget ‘giveaways’.”

He said the softer Irish survey last month contrasts with buoyant mood of US and Euro area consumers.

Mr Hughes said income growth is still modest for most households and significant uncertainty persists about future prospects.

“It remains the case that caution rather than confidence is the key influence on Irish consumer behaviour at present.”

He said this mean any increase in household spending in the key final months of 2017 is likely to be modest rather than large.

KBC Bank said it does not consider the slight drop in consumer sentiment in October as marking any significant change in thinking on the part of Irish households.

But the contrast with the US and Euro area readings highlights the lack of a self-reinforcing ‘feel-good’ factor in the Irish economy that would drive confidence consistently higher.

“This reflects both the shadow cast by forces such as ‘Brexit’ on the macro outlook and the scarring, both financial and psychological, that remains from the financial crisis.” Mr Hughes said.

Economist with the Economic and Social Research Institute Conor O’Toole said the downbeat view of the personal circumstances of households was outweighing a more positive outlook towards the labour market.

“The contrast between favourable expectations towards the labour market and subdued views on personal finances suggests that households may not be experiencing a significant impact of the improving economy on their own circumstances,” he said.

The drop in consumer sentiment here contrasts with the US and the rest of Europe.

In the US, consumer sentiment posted its highest reading since Jan 2004 on upgraded views of household finances and the broader economy.

Greater optimism regarding a strengthening economic upswing, particularly on the part of consumers in Germany, Austria and Benelux countries, was the main driver in boosting Euro area consumer confidence to its strongest level since April 2001.     

UK consumer confidence weakened somewhat in October, but the main driver was a poorer economic outlook as views on household finances improved slightly.

The factors influencing sentiment last month here and in our near neighbours were somewhat different even if both surveys moved in the same direction, Mr Hughes said.

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