Consumers’ confidence bounces back

CONSUMER confidence bounced back last month, while the services sector also saw strong growth in activity and new business, according to figures released yesterday.

The monthly Consumer Sentiment Index, which was published by IIB Bank and the Economic and Social Research Institute (ESRI), found consumers recovered in confidence in September and reversed the declines seen during August.

The index registered 95.5 during the month, which was up from 93.6 in August but below the 103 average seen over the survey’s nine-year lifetime.

The index regularly exceeded 120 during the late 1990s.

IIB Bank economist Austin Hughes said the figures showed signs consumers were upbeat about the broader economy but remained cautious about their individual financial positions.

“The current reading is indicative of an economy that is clearly healthy but not hot,” said Mr Hughes.

He saw no evidence of a “feel good” factor that would signal the return of a boom period in the Irish economy. Mr Hughes said consumer sentiment was likely to be boosted by new Finance Minister Brian Cowen’s first budget in December and that wage growth coupled with tax reductions would lead to a visible improvement.

Inflation, higher debt and increased public service charges were the main factors holding back consumer confidence, he said.

“We reckon Mr Cowen will go some way towards encouraging an improvement in sentiment in the forthcoming budget.

“However, we think he may be notably more generous in the budget after next, than he will be in December,” said Mr Hughes.

Separate figures published yesterday by NCB stockbrokers showed overall business activity in the services sector grew for the sixteenth month in a row in September. The monthly Purchasing Managers’ Index (PMI) registered 57.3, which was a slight dip from the 58.1 recorded in August but ahead of the 50.0 watermark that represents the difference between positive and negative territory.

NCB senior economist Eunan King said the outlook was good and the figures suggested employment was still growing in the services sector.

“Activity continues to hold up well, suggesting that supportive domestic factors dominate,” he said.

Businesses surveyed reported strong demand from both Irish and overseas customers. But they also faced pressure to cut prices to win new business.

Employment numbers grew for the thirteenth month in a row, while business confidence picked up on August’s levels.