Irish consumer sentiment remains gloomy despite slight rise on the back of budget measures

Pressures on consumer confidence seem set to intensify as winter weather emphasises high energy costs

Recent falls in Irish petrol prices alongside budget measures supporting household spending power helped Irish consumer sentiment in October.

Consumer sentiment in Ireland remains weak despite a small uplift in the wake of the Budget 23 measures announced last month.

The Credit Union Consumer Sentiment Index — formerly the KBC Bank Consumer Index — increased to 46.1 in October, up from the 14-year low of 42.1 recorded in September.

The four-point rise in the index this month represents only a limited reversal of the 11.3-point decline seen in September. 

This likely reflects that the pressures weighing on Irish consumer confidence remain formidable and seem set to intensify as winter weather emphasises how expensive energy costs have become.

Only 10 of the previous 320 readings in the near 27-year history of the survey were weaker than the current figure.

As such, the index implies Irish consumers are very gloomy about the circumstances they now face.

The monthly survey of 1,000 adults took place during a period that saw notable downgrades to a range of economic forecasts at home and abroad, and repeated signals from the European Central Bank that further large interest rate increases are planned for coming months.

Economist Austin Hughes said it was their analysis that the slight pick-up in October primarily reflects a response to budget support measures: 

It could be that recent falls in Irish petrol prices alongside Budget '23 measures supporting household spending power helped Irish consumer sentiment in October.

The sharp drop in Irish consumer sentiment in September was seen in all elements of the survey but was most pronounced in those aspects focused on consumers’ own household finances.

"The prospect of markedly higher energy bills through the winter months allied to more broadly based inflation pressures threaten a marked adjustment in living standards and spending," Mr Hughes said.

"So, concerns around the broader economy are likely to be the result of consumers extrapolating their own difficulties across the entire range of households and firms and judging that this will translate into a marked slowdown in spending."