Consumer sentiment stages a rebound

Consumer sentiment rebounded from a weak December last month, with new data indicating that people are less fearful of measures included in the recent budget than first thought.

Highlighting the unpredictable mood of the Irish consumer at present, January’s edition of the KBC Bank Ireland/ESRI consumer sentiment index — published yesterday — registered a reading of 64.2 points.

While still down on the long-term average of 86.1 points, January’s reading totally wiped out the heavy fall seen in December. That month’s budget announcement resulted in the index falling from 63.8 points to 49.8 points.

KBC’s chief economist, Austin Hughes, remarked that a mix of heavy price discounting in the Christmas sales, and people becoming less worried about budget fallouts drove the January rise.

“Encouraging as the January sentiment survey results may appear, we would repeat some of the caution we expressed in relation to the December data. The volatility of the market through the second half of 2012 — and now in early 2013 — highlights the fragility of sentiment and the degree of nervousness that the average Irish consumer feels about economic and financial prospects,” he added.

Mr Hughes pointed out that negative responses still outweighed positive ones to most of the questions in the latest edition of the survey.

He added that the latest survey supports the view that the domestic economy is showing signs of stabilisation, and may even be starting to show a slight and patchy improvement. However, as with the December survey, he noted that the January index could be largely exaggerated.

Industry representative body Retail Excellence Ireland welcomed January’s uplift in sentiment, but warned that it remains too early to call this a definite recovery.

“The market remains fragile and consumers are still nervous about spending. We are hoping that this increase in consumer sentiment will continue through the beginning of 2013,” REI chief David Fitzsimons said.

“The latest consumer sentiment index shows that the positive Christmas sales figures reported by REI in January may have contributed to this increase in consumer sentiment. Also, many retailers discounted heavily in December to generate sales.”