Households reluctant to splash out

Consumers are still failing to tap any feel good factor about their personal finances and are reluctant to make expensive purchases despite the continuing growth of the economy and lower unemployment, according to a leading survey.

The monthly survey by KBC Bank and the Economic and Social Research Institute showed consumers slightly less upbeat in August.

“With income growth for many, modest at best and significant legacy problems from the crisis, pressures on household finances remain widespread.

“In turn, this means that those seeing a clear improvement in their personal financial circumstances either in the past 12 months or in their prospects for the year ahead are notably smaller than those not seeing any improvement and also well below the number of consumers expressing positive views on broader macro prospects,” said the survey.

It comes as the CSO figures showed that unemployment again edged lower, to 6.3% in August from 6.4% in the previous month. It stood at 7.9% a year earlier.

Other figures showed manufacturing increased 1.3% in July from June, but was down 10.3% from July 2016. The output from manufacturers in the so-called traditional sector of the economy, which employs a significant number of people, rose 1.2% in the year.

Conor O’Toole at the ESRI said its consumer index was only slightly above the level of a year earlier and that there was “a significant fall in the willingness to make large household purchases”.

“Contrasting this personal experience with their more positive outlook on wider economic developments, hints at a continued frustration with their own financial situation and a potential disconnect between the economic recovery and many households day-to-day experiences,” he said.

Austin Hughes, chief economist at KBC Bank Ireland said: “The slight drop in sentiment in August isn’t entirely surprising and largely reflects a pullback in spending plans as summer sales and holidays end and the focus of many consumers turns to back-to-school costs and other pressures on household finances.

With the majority of consumers not reporting any improvement in their spending power, it is not surprising that the survey readings are buffeted this way by even small changes in the pattern of household outlays.

“In broad terms, the August survey suggests sentiment remains positive with fears about the extent and timing of any negative impact from Brexit or the US election outcome continuing to ease. However, most consumers don’t see their own personal finances improving.”