Consumer confidence up but no spending spree

CONSUMERS continue to grow in confidence but a boom-style spending spree remains a long way off, according to a monthly survey released yesterday.

The Consumer Sentiment Index, produced by IIB Bank and the ESRI, showed consumer confidence increased for the tenth month in-a-row in May.

But IIB Bank's Austin Hughes warned the latest figures were nothing to get carried away with, as consumers remained cautious about their spending plans.

The May sentiment index measured 91.1, which was marginally ahead of the 90.8 recorded the previous month but easily eclipsing the 86.9 registered in March.

Mr Hughes said the increase was welcome but that it reflected a consolidation of this year's gains.

"While the trend in consumer sentiment suggests the economic upturn is continuing, the details of the data imply Irish consumers feel there are as many reasons to be cautious as there are to be cheerful in the current economic climate," he said.

Mr Hughes cited three factors behind consumers' caution risks to the economic outlook arising from concerns over terrorism and rising oil prices, a hangover from the boom when people engaged in heavy spending on so-called "big ticket" purchases of household goods, and current spending constraints arising from sharp increases in personal debt levels.

"Drawing together these elements, we reckon a bonanza in consumer spending is still some distance away. The prospects of future budget largesse and maturing SSIA's mean a spending boom is more likely to occur in 18 to 24 months time, rather than in the immediate future," he said.

Consumers were slightly more cautious about their current spending plans than in the previous month, but this was outweighed by more positive news regarding their future expectations.

"The most positive aspect of this survey was in relation to the expected trend in household finances over the next 12 months," said Mr Hughes.

Irish consumers were more upbeat about their personal finances in May than at any time since June 2002.

This reflected a belief that an improving climate would eventually translate into more money coming into households.

The ESRI's David Duffy said fewer than half of consumers expected the unemployment rate to rise over the next year. This was the first time this level of confidence had been seen since the summer of 2001.

But Mr Duffy noted continuing caution, as only 20% of those surveyed expected unemployment to fall, with the remainder expecting the picture to remain unchanged.