Irish consumer sentiment climbed unexpectedly during September

FALLING oil prices, bringing forward the budget and job wins by the IDA all helped to push consumer sentiment up in September for a second successive month.

The increase in the IIB/ESRI Consumer Sentiment Index to 45.0 from 43.4 in August was marginal and suggests consumers’ confidence is still at low.

IIB chief economist Austin Hughes said the rise was a surprise and pointed out that the survey was compiled before the recent turmoil in financial markets.

“It implies that although Irish consumers remain extremely cautious, they are still open to good news. So, consumers may be down but they are not entirely out,” he added.

Mr Hughes said the main increase in improved consumer sentiment in September was a less gloomy outlook for household finances in the coming year.

“This probably owes a good deal to a sharp fall in oil prices over the survey period. Crude oil prices dropped from $121 per barrel in mid-August to $101 in mid-September.

“Not alone will this directly ease the squeeze on the spending power of Irish households but the associated impact on inflation makes an ECB interest rate cut more likely if still some distance away.” he said.

Another positive element in the September survey was a slight improvement in consumer sentiment in regard to prospects for the broad Irish economy, according to Mr Hughes.

The IIB/ESRI have repeatedly emphasised the key role that changes in the budgetary outlook have had on Irish consumer sentiment through the near thirteen year history of the sentiment survey .

“The improvement in sentiment in August and September might be interpreted as suggesting consumers now find good news more surprising than bad. However, they remain overwhelmingly cautious,” Mr Hughes added.