Consumer feeling improves slightly after sharp fall

IRISH consumer sentiment improved modestly in October after three successive months of decline, according to a new survey from IIB Bank and the Economic and Social Research Institute (ESRI).

Fears about the impact of high oil prices eased but overall, confidence remained tentative.

The IIB/ESRI consumer sentiment index rose to 85.0 in October, recovering less than half of September's sharp fall when the index hit a 21-month low of 80.5.

IIB Bank chief economist Austin Hughes said oil prices had slipped back from highs hit in the wake of hurricanes in the United States, and that the broader economic impact was perceived as being less threatening.

However, the general thrust of the October survey remained negative, with 44% of Irish consumers expecting the economic situation to deteriorate in the year ahead and only 20% anticipating an improvement.

"As recently as May 2005, more consumers felt the economy would improve than deteriorate in the coming year. So there has been a marked downgrading of economic prospects by consumers since the early summer," he said.

Consumers did not seem to share the generally optimistic view taken by most Irish economic forecasters who, despite a recent trimming of expectations, believe growth is likely to remain relatively robust for the foreseeable future, he said.

The Irish economy is expected to grow by more than 4 % this year well ahead of its eurozone peers.

Mr Hughes noted a "disjoint" between a solid "macro" picture driven by job growth and inward migration on one side and, on the other side, subdued wage growth, rising living costs and diminished job security weighing on the average consumer.

An upward inflation trend was also eating into living standards in a country where costs are perceived as being already high in relation to the rest of the eurozone.

Mr Hughes said it would require a further softening of energy costs and a fairly generous budget in December to awaken a "feel-good" factor in Irish consumers.