Economy still short of spending boom

THE Irish economy is still short of hitting a fully-fledged spending boom because of fears for the global economy, the latest gauge of consumer sentiment indicates.

The overall IIB Bank/ESRI Consumer Sentiment Index improved in June. The June reading of 99.6 compares to a figure of 97.4 in May.

IIB bank chief economist Austin Hughes said that, while Irish consumers are sufficiently optimistic about the future to increase borrowing in order to purchase property, buy new cars, book holidays and take advantage of summer sale bargains, these trends also rely heavily on the cheap price and ready availability of credit.

"More generally, the tone of the consumer sentiment index and the evidence coming from retail sales data suggest the Irish economy still remains some distance from a fully-fledged spending boom," he said.

Mr Hughes said he feels the June sentiment data reflect the continuing influence of opposite and frequently confusing factors acting on consumer confidence at present. "On the positive side, there is clear evidence of a strong Irish jobs market and a generally healthy domestic economic climate. At the same time, concerns about the outlook for the broader European economy highlighted by the recent French and Dutch referenda and more general uncertainty about global economic prospects seem to be injecting a note of caution into the minds of Irish consumers.

"Most importantly, in the face of this economic 'crossfire', Irish consumers lack the sort of clear improvement in their own spending power that would allow them set aside worries about the global 'macro' climate. We think Irish consumers remain firmly in a 'show me the money' mode," he argued.

The IIB economist said the improvement in consumer sentiment this month was entirely driven by increased optimism about employment. "We think it is notable that the improvement in thinking on employment did not spark a more generalised strengthening in other areas of the survey. This seems to underline the generally cautious tone of consumer sentiment at present. Alongside a more positive jobs reading in the June survey was the most negative assessment of broader economic prospects in seven months."