Consumer sentiment improves
The overall IIB Bank/ESRI Consumer Sentiment Index improved in July to 96.6. This compares to a figure of 90.1 in June.
Turnaround in sentiment since the July 2003 low-point has been dramatic. All main elements of the survey posted increases last month, but once again the key driver of the rise was growing optimism towards the jobs market. A year ago, one in 20 consumers expected the jobs market to improve. Now one in four expect the jobless rate to fall in the next 12 months
IIB Bank chief economist Austin Hughes said that a further improvement in sentiment towards the jobless market suggests employment prospects have brightened considerably of late and hints that unemployment will continue to trend lower in coming months.
"While July's consumer sentiment reading is consistent with a continuing upswing in economic activity, the details suggest we are still in the foothills of a recovery rather than on the threshold of a consumer spending boom.
"Consumers are still cautious about personal finances, though previous worries about incomes and employment are easing. A generous Budget could provide the catalyst for a return of the feel good factor, but a rising interest rates trend will be an important counterweight," he added.
While consumers were more positive about their own financial situation, the improvement in the personal finance elements of the survey was far more modest than in those relating to the general economic climate. "This suggests the emergence of stronger economic conditions has yet to translate into significant gains in household incomes. As a result, consumer spending is likely to continue to lag the upturn in the Irish economy," they added.
Twelve months ago, the survey series found there were widespread concerns that economic weakness could become a long-term feature of the economic landscape.
"There were particular worries about a large-scale haemorrhage of jobs from this country. In the July 2003 survey results, seven out of eight consumers were fearful of a rise in unemployment in the following 12 months. Twelve months later this has dropped close to two in five consumers," they said.
