Monday 22 October 2018

Recovery continues 'two steps forward, one step back' trend

Economist Austin Hughes
Economist Austin Hughes
Charlie Weston

Charlie Weston

Consumers were in a more downbeat mood last month as they pulled back on spending and took a more cautious view of the prospects for the economy.

The KBC Bank/ESRI consumer sentiment index fell to 105.2 in February from the 17-year high of 110.4 recorded in January.

The people who compile the index said the "big chill" of the financial crisis may be well behind us, but the economic thaw has been slow and uneven.

The survey points to a gradual return to more normal conditions, but the pull-back in consumer sentiment in February suggests this may yet take some time, KBC Bank economist Austin Hughes said.

He added that the lack of continuous month-on-month gains emphasises the absence of any broadly based consumer boom in the Irish economy at present.

"Instead, the trend in consumer confidence seems consistent with the prospect of solid, rather than spectacular, gains in Irish consumer spending in 2018," Mr Hughes noted.

The February sentiment reading is higher than any of the results for the end of last year, suggesting the broad trend in Irish consumer confidence is still positive, the economist said.

That is also the implication of notably greater positive than negative responses to each of the five key questions on which the survey is based.

But the fact that there haven't been back-to-back monthly increases in the sentiment series since last July testifies to the lack of a pronounced feel-good factor.

It also highlights the uncertainties and pressures many consumers face in regard to their household finances, he said.

"The average Irish consumer is sensing a recovery, but it is still taking a shape that is two steps forward, one step back," said Mr Hughes.

Philip Economides of the Economic and Social Research Institute (ESRI), which compiled the index, said it appears that sentiment is back somewhat after a significant increase in January.

"Overall, it is not uncommon for the index to retreat in February after such a substantial improvement in the preceding month," Mr Economides said.

But he said that overall consumers continue to show signs of improved financial circumstances.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business