Consumer sentiment boosted by positive Budget

CONSUMER sentiment jumped in December, buoyed by a positive response to Brian Cowen's first Budget.

The IIB Bank/ESRI Consumer Sentiment Index rose to 103.9 in December, up from an unexpected low of 92.6 in November.

IIB Bank chief economist Austin Hughes says the sharp rise in consumer sentiment last month is partly a correction after the surprise fall in November. "We think a positive assessment of Mr Cowen's Budget was also a driver of the improvement in sentiment last month. It is notable that, the strongest gains were seen in aspects of the survey connected with the economy as a whole rather than consumers' own personal financial situation.

"The surge in consumer sentiment could reflect a preference for what was regarded as a socially inclusive Budget. It is more likely that consumers were pleased that there were no unpleasant surprises in the Budget Day announcements. On the evidence of previous surveys, it seems to be the case that consumers recognise that sensible Budget policies imply a brighter economic outlook whereas giveaways will have to be paid for in the future," he said.

Mr Hughes says the rise confirms that consumer confidence, like the broader Irish economy, ended 2004 on a strong footing.

"However, the uneven pattern of the past few months suggests that consumers are still somewhat unsure about how strong the economic upturn may be and perhaps whether it will spread across all sectors and households."

The ESRI's David Duffy noted that forward-looking sub-index, the expectations index, rose to 104.7 in December from 87.9 in November. The index of current economic conditions rose modestly to 102.6 in December from 99.6 in November.

"The overall rise was driven by an improvement in consumer expectations," he added.