Recovery in confidence but consumers retain cautious outlook

By Geoff Percival

Economists have urged the Government to heed the “multi-speed” nature of the country’s economic growth when framing future policy, with latest data pointing to “an uneven recovery” between businesses and households.

The latest monthly consumer sentiment index — jointly authored by KBC Bank Ireland and economic think-tank the ESRI — shows a recovery in confidence from the drop seen in April. However, there was a dip in sentiment towards the 12-month outlook for the economy and personal finances; and nothing to suggest the Irish economy is in danger of overheating.

“The May sentiment survey suggests confidence on the part of Irish consumers is strongly tempered by caution. Expectations for the Irish economy and household finances both dipped slightly last month as risks to the global outlook continue to emerge and many consumers continue to face financial strains,” said Austin Hughes, chief economist at KBC Ireland.

“There is certainly no sign... of any ‘exuberance’ in the behaviour of Irish consumers that might be symptomatic of an overheating economy at present,” he added, alluding to the OECD’s warning, last week, that signs of overheating were beginning to emerge and that tighter mortgage lending controls may be needed to ease the threat.

“Instead, the tone of the latest consumer confidence reading is entirely consistent with recent indicators showing modest increases in earning and spending that point towards an uneven recovery across households and businesses,” said Mr Hughes.

The ESRI’s Philip Economides said risk factors such as Brexit and international developments may be contributing to “an air of caution” amongst consumers.

“There are sectors of the Irish economy experiencing strong growth at present,” he said. “In some instances, the current pace of increase could be problematic if it persists for another couple of years or if it were intensified by fiscal or credit largesse. However, there is little indication that either of these levers is currently over-extended and the survey suggests consumers’ expectations are relatively modest rather than excessively demanding.”

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