Consumers ‘cautiously optimistic’

CONSUMERS remained cautiously optimistic in August despite a wave of global turmoil that hit consumer sentiment in the US and Europe.

The KBC Ireland/ESRI Consumer Sentiment Index stood at 55.8 in August, a touch below the 55.9 registered in July but well below a two-and-a-half year high of 67.9 reached in June last year. While perceptions of current conditions worsened, optimism about the future improved, the survey showed.

Austin Hughes, chief economist with KBC Bank, said: “The August sentiment reading also hints that some consumers are finding a silver lining in dark economic clouds.

“The reduced threat of further (European Central Bank) interest rate increases and a softening in oil prices seems to have helped sentiment.”

Ireland is meeting the fiscal targets of its EU/IMF bailout, but Finance Minister Michael Noonan has admitted that a deepening of the European debt crisis and spluttering US growth could bring the export-reliant Irish economy back into difficulty once again.

US consumer confidence plunged in August to its lowest since the 2007-2009 recession. German consumer sentiment fell to a 10-month low going into September, while confidence among British consumers fell to its lowest level in four months in August.

The unchanged Irish index might seem to suggest Irish consumers are either remarkably “sanguine or stupid”, according to KBC and the ESRI.

“However, Irish consumers hadn’t upgraded their expectations anything like their US or euro zone counterparts in the past couple of years.”

A gloomier global outlook may necessitate more pain in December’s budget for next year that already promises to cut spending and hike taxes by at least €3.6 billion.

While Ireland is banking on its booming exports to return it to economic growth this year, it desperately needs consumer spending to stop falling in order to meet medium-term growth targets crucial to dealing with a mounting debt pile.

The index of current economic conditions weakened to 72.6 in August from 74.2 in July. The forward-looking sub-index, the expectations index, increased to 44.5 in August, from 43.6 in July.