Consumer sentiment reaches 15-year high

Consumer confidence reached a 15-year high, last month, but positivity surrounding the jobs market has taken a dent.

The latest KBC Bank Ireland/ESRI consumer sentiment index — for January — basically shows that an improvement in household finances is outweighing concerns over jobs and the wider economy, at the moment.

The index shows a reading of 108.6 points for last month; up from 103.9 in December.

The December reading was a 10-year high and January’s index shows the strongest level of confidence since February 2001.

“The improvement in Irish consumer sentiment in January seems largely due to domestic developments as comparable confidence measures for many other countries posted slightly weaker readings last month,” said KBC Ireland chief economist Austin Hughes.

However, there was a notable weakening in employment sentiment in the latest survey.

While still reasonably positive, 49% of respondents said they anticipate a fall in the unemployment rate over the course of the next 12 months.

This was down from 51% in the December survey, however.

Similarly, the percentage of those anticipating a worsening in employment levels has gone up from 16% to 21% in the past month.

“We can’t fully explain why thinking on the Irish jobs market weakened last month,” said Mr Hughes.

“It could reflect concerns that the most threatening consequence of poorer global conditions would be felt in their impact on employment.

"These results may also owe something to substantial job losses at C&C reported during the survey period.

"It might even be that some consumers feel quite removed from the sort of jobs market conditions implied by a range of recruitment surveys suggesting pay growth is picking up notably.

"Of course, it is also possible that this result could simply be a statistical blip,” he added.

The end of year pick-up in consumer spending patterns may have had a knock-on effect on sentiment levels, leading the survey’s authors to suggest the potential for a slight dip in February’s readings.

However, they claim to have seen enough in the January index to suggest Irish consumer confidence is on a firm enough footing.

According to Mr Hughes: “The strength seen in other aspects of the survey, related to personal finances, seems to reflect growing confidence that household spending power is now set on an improving trajectory.

"For the first time since 2006 slightly more consumers reported an improvement, rather than a deterioration, in their personal finances over the past year.

“Admittedly, the balance was relatively small, which suggests the turn is still uneven.

"However, some sense of how much more broadly-based the economic upswing has become of late is suggested by a comparison with the January 2015 survey, when negative responses outnumbered positive responses by about two-to-one,” he said.

Mr Hughes said while household finances are at their strongest since 2000, and should stay strong for 2016, “this shouldn’t be read as implying a surge in Irish households’ spending power is now underway.”