‘Economic apocalypse’ fears easing

THE fears of an “economic apocalypse” that became widespread late last year are slowly fading, according to the latest consumer figures.

The KBC/ESRI consumer sentiment index rose to 59.4 from 57.9 in April, largely reversing the decline seen a month ago. This compares to 65.3 in May last year.

KBC chief economist Austin Hughes said the May results are encouraging and suggest the underlying trend in consumer sentiment is improving despite current readings indicating that confidence is limited and spending is likely to be restrained.

He said the results suggest that fears of an economic apocalypse, which became widespread late last year, are slowly but surely fading as 2011 progresses.

Mr Hughes said: “Importantly, the extreme fears that became widespread in late 2010 continue to fade. There appears little prospect of a marked improvement in the circumstances facing the average Irish consumer, but these results suggest an increasing confidence in their ability to adapt to tough times.

“Unfortunately, this also suggests the best that can be expected is that an understandable reluctance to spend eases gradually as the year progresses.”

The biggest change in the May survey was an easing in unemployment concerns. Irish consumers are worried about the risk of job loss but the degree of fear seems to be easing slightly.

“It may be that consumers are responding to tentative evidence of an easing in layoffs and some limited pick-up in new hiring of late,” said Mr Hughes.

The forward-looking sub-index, the expectations index, increased to 50.8 in May from 42.3 in April, driven primarily by a more positive perception by consumers of the outlook for the labour market.

The index of current economic conditions weakened to 72.1 in May from 81 in April, as consumers became more negative in their perception of the current buying climate and their current household finances.

David Duffy of the ESRI said the main impetus to the improvement in sentiment came from a more optimistic assessment of future prospects, rather than current conditions.

The improvement in Irish consumer sentiment in May mirrored gains in measures in many other countries.

The royal wedding was credited with a sharp jump in consumer sentiment in Britain. According to one measure, it showed the biggest monthly improvement since 1993.

Mr Hughes said: “As UK economic circumstances have not changed markedly of late, analysts are attributing much of the bounce in confidence to the royal wedding and the associated bank holiday in the UK as well as unusually good weather during the survey period.”

He said any “special event” impact, such as the Queen and Obama visits on Irish consumer sentiment won’t be revealed until the June Index is compiled.