Consumer sentiment at its highest level in five years

Irish consumer sentiment is at its highest level in almost five years as the Olympic factor gave consumers a small boost.

But it is an improved economic outlook that was responsible for the upswing in the main.

KBC bank said it was more a case of consumers being less terrified, than more confident, however.

Chief economist, KBC Bank Ireland, Austin Hughes said: “While the monthly change in August was relatively modest, it was the seventh increase in the past eight months. So, it appears that there has been a sustained change in the mood of Irish consumers thus far in 2012. We continue to believe that the improvement in sentiment is primarily driven by an easing in fears rather than by a radically more positive view of either the outlook for the Irish economy or consumers’ own finances.”

Consumers are now just as confident as they were before the economic collapse fully took hold, but Mr Hughes was keen to point out that the index measures consumer sentiment or mood not their financial health.

“The nature of a sentiment index is that it attempts to measure the subjective mood of consumers. Five years ago, Irish consumers were becoming increasingly nervous about the economic outlook. On the evidence of recent data, those same fears are beginning to slowly lift,” he said.

KBC looked to measure the Olympic effect or in this case the John Joe Nevineffect, by looking at responses to the sentiment survey before and after Mr Nevin secured Ireland’s first Olympic medal in boxing.

“Responses given after this date were marginally more positive but not markedly so. As a result, it does not appear that the August reading was significantly altered by some encouraging Irish sporting performances during the survey period. Instead this month’s survey seems to reflect a further modest upgrading of the economic environment facing consumers,” said Mr Hughes.

One of the key findings of the survey was that the number of consumers who felt that the economy would get worse was down from 59% in Aug 2011 to 34% this month.

Despite the good news and indication that Ireland was one of the few regions where consumer sentiment was improving, Mr Hughes said that the looming spectre of the property tax could undo all the gains in consumer confidence.

“We think there is some risk that expectations in regard to household finances could be vulnerable to a notably increased level of speculation of late in regard to both the nature and scale of painful adjustments that could feature in Budget 2013. In this context, particular uncertainty about the form the proposed property tax might take could be a particularly unsettling influence,” he said.


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