Consumers sense siege is lifting as confidence hits three-year high
CONSUMER confidence is at its highest level in three years even though people fear their spending power is going to reduce further.
As new figures reveal inflation is also at its lowest level in three years, a survey by research company Behaviour & Attitudes (B&A) found that confidence is at a higher level than it was before the bailout of 2010.
However, despite the fact that more than 55pc of people believe the economy and their own personal finances will continue to worsen, the fear of what this could lead to seems to have lessened, suggesting people are battle weary but resilient, said B&A director Luke Reaper.
"This leads us to believe that Irish consumers, while still viewing the economy negatively, are beginning to weather the storm of economic events with a heightened degree of reassurance, which was previously absent," he said.
The big concern was how to translate that stability into spending as people still expected their incomes to decline.
New figures from the Central Statistics Office (CSO) show that the cost of living rose 0.5pc in the last year but, overall, prices were unchanged during April. This means annual inflation has remained at its lowest level since September 2010.
Shoppers saw price increases of over 5pc for lamb and pizza and of almost 4pc for crisps, chocolate and fish last month, meaning overall food prices have risen 1.6pc in the last year.
And while private rents are up by 5pc, mortgage costs are down 6.8pc in the last year – and last week's European Central Bank interest rate cut will bring that down further for those on tracker mortgages.
Alcohol prices are up over 5pc in the last year but there was some relief for drinkers as wine prices actually fell by 3.8pc last month.
Transport costs are down by 1.5pc in the last year, mainly due to an 18pc fall in airfares in April, while diesel prices also fell slightly.
Consumers were also hit with a 3.2pc increase in health insurance premiums.
Alan McQuaid of Merrion Capital said that austerity measures such as the property tax would continue to hit disposable incomes and dampen consumer demand.
"It is now hard to see the average inflation rate for the year as a whole coming in much higher than 1pc as against 1.7pc and 2.6pc in 2012 and 2011 respectively," he said.
The Irish Small and Medium Enterprises Association (ISME) warned that government-influenced costs were continuing to rise, adding that these should be benchmarked against international competitors.
"The cynical increases in bank interest and charges from our bailed-out banks will add to inflation, at a time when the opportunity presents itself to reduce costs and increase our national competitiveness," said ISME chief executive Mark Fielding.