By Eamon Quinn
Individual Irish consumers are still not feeling their household wealth improve significantly, even as overall spending in the economy picks up because more people are back in work, according to a survey by KBC Bank and the ESRI.
Their latest monthly reading means the risk to the economy from over-heating remains far off, despite a range of indicators suggesting there is a lot more money in the economy, as unemployment falls and manufacturing has increased output, they said.
The Department of Finance will today publish January’s tax returns, which could show that Government revenues have tapped rises in overall spending and that Vat receipts, for instance, are on course to rise steadily in the coming months.
But with no boom in spending on the horizon, “the trend in consumer confidence seems consistent with the prospect of solid rather than spectacular gains in Irish consumer spending in 2018,” cautions the KBC-ESRI survey.
The survey showed that in February only 25% of consumers believed their finances will improve this year — down from 30% in January. In February, “very few” consumers believed their finances will worsen “but not many” project significant gains either, and the main consumer sentiment slipped in the month, it showed. “The February sentiment results suggest that quite a number of Irish consumers may still be feeling a financial chill,” said KBC Bank Ireland chief economist Austin Hughes.
“While confidence is gradually improving, the drop in February reflects expectations of limited growth in spending power and a corresponding pull-back in buying plans. A good deal of this is a post-Christmas correction but the survey also suggests that the Irish economic temperature is still some way from overheating,” he said.
“The February results are still consistent with a healthy increase in aggregate consumer spending in the Irish economy but such gains significantly reflect increases in numbers at work and in the population as a whole that mean more people are in a position to spend,” the survey shows.