Consumers shrug off Budget as confidence rises in January
CONFIDENCE among consumers shot up last month as they shrugged off the Budget.
The jump in the KBC Bank Ireland/ ESRI Consumer sentiment index more than reversed the decline felt in December, when worries about the impact of the Budget played on households.
But positive results are common for the first month of the year, with a bounce brought about by the Christmas sales.
The most significant change in the index was the expectation for unemployment, which improved to a level not seen since mid-2007.
Austin Hughes of KBC Bank said sharp changes in the index in recent months suggested that consumers were unsure about the health of the economy and nervous about their finances.
"The drop in December centred on concerns about the damage to household spending power from a range of measures in Budget 2013, whereas the improvement in January was most pronounced in consumers' assessment of the outlook for the Irish economy in the coming year," Mr Hughes said.
"So, positive economic data and increased hopes for a debt deal with Europe seem to have become the focal point of the January survey."
The overall Index rebounded from 49.8 in December to 64.2 in January. It rose above the 61.7 average for the last 12 months.
It is believed four factors contributed to the turnaround including encouraging news about the economy in the final days of last year, consumers becoming less fearful of the budget's impact, and the respite from gloomy financial news over Christmas.
Price discounts from the Christmas sales also helped boost confidence.
Kevin Timoney of the ESRI said sentiment was much improved for every category.
"The most significant change related to expectations for unemployment, which improved to a level not seen since mid-2007," Mr Timoney said.
But both organisations warned that consumers are still nervous about the economic and financial prospects.
"The January results may signal the worst is over in terms of these concerns, but because Irish consumers remain cash-strapped and cautious, sentiment and spending are unlikely to show any marked improvement in the month ahead," the index commentary noted.