Confidence hits 18-month high

By Niamh Hennessy

Wednesday, November 04, 2009

CONSUMER confidence hit an 18-month high in October, but retailers warn of tough trading conditions in the run-up to Christmas.

The KBC/ESRI consumer sentiment index rose to 54.2 from 49.6 in September. This compares with a reading of 42 in October last year and to an all-time low of 39.6 reached in July 2008.

Austin Hughes of KBC Ireland said that while consumers may feel marginally less gloomy they seem very unlikely to rush to the shops.

"That said, the pick-up in sentiment should imply a slight improvement in consumer spending in the run-up to Christmas," he said.

Three out of four consumers expect unemployment to rise further next year, while only one in 10 see unemployment easing.

The measure of how consumers view economic conditions increased to 74.7 in October from 72.3 in September, according to the survey. The index of consumer expectations rose to 40.4 from 34.4.

David Duffy of the ESRI said: "Once again the rise in consumer sentiment is mainly due to improved consumer expectations. Although there has been an improvement in sentiment consumers continue to be cautious."

Retail Ireland said that confidence among consumers is still fragile and it has called for a major reduction in excise duty and VAT ahead of the Christmas shopping period.

Retail Ireland director Torlach Denihan said: "The key to both economic recovery and to securing employment in the retail sector is to restore consumer confidence. It is critical that Government does not increase taxes in the forthcoming budget and that the bulk of the adjustment to the public finances takes place on the spending side."

The group also said that a further threat is the continued weakness of sterling, which poses a "major threat" to employment in the retail sector in the run-up to Christmas.

It estimates that cross-border shopping costs the Exchequer €430m a year.

Mr Hughes said the October figure indicates that consumers believe the economy has reached a turning point. Signs of improvement in the global economy helped as did falling prices and the expectation that borrowing costs will remain low for some considerable time.

This story appeared in the printed version of the Irish Examiner Wednesday, November 04, 2009