Sentiment strengthens as consumers feel worst fears unlikely to be realised

Consumers have been dealing with one of the worst global cost-of-living crises ever experienced.

Irish consumers' outlook on the economy has improved significantly rising to its highest level in 13 months.

The combination of the Easter break and the anniversary of the Good Friday Agreement provided consumers with some respite from the normal run of worrisome economic and financial reportage, according to the monthly Credit Union Consumer Sentiment Index.

The index rose to 59.7 in April from 53.7 in March. The 5.4-point month-on-month rise more than reversed the 1.7-point decline seen between February and March, meaning that a clear if constrained trend recovery in Irish consumer sentiment that began last autumn is still firmly in place.

Although fears of a full economic or financial meltdown may be fading, many consumers still face significant uncertainty and substantial financial strains.

All five main elements of the index showed month-on-month gains in April. The largest improvement is related to the outlook for employment. This mirrors the resilience of the Irish jobs market to the recent tech sector job cuts with the country remaining near full employment.

"Encouragingly, all three elements of the sentiment survey related to household finances showed clear gains in April," Economist Austin Hughes said.

"The softer trend in energy costs of late, suggestions that borrowing costs might not rise as far as feared previously and a softer but still positive trend in house prices may all have contributed to a view that financial pressures would not worsen as much as had been widely expected.

Cost of livng

Consumers have been dealing with one of the worst global cost-of-living crises ever experienced which commenced with the Russian invasion of Ukraine as the world emerged from the impact of covid restrictions. Fears over energy security led to a surge in prices. Government and central banks have been attempting to rein in runaway inflation that reached double digits in the second half of 2022.

Measures such as business supports and energy credits were rolled out to alleviate some of the impact. 

Despite the positive reading for April, the gap between the current reading of 59.7 and the 27-year average of the sentiment series at 85.3 suggests that any recovery in Irish consumer confidence has still some distance to go before it might be considered fully formed.

"A still nervous and cash-strapped Irish consumer may be looking towards a glass that is starting to appear half full rather than one at imminent risk of being drained," Austin Huges said.

"In turn, this suggests that while the trend in consumer spending might improve, there is little sense that a major surge in spending is about to be unleashed."