June weather may have boosted consumer sentiment

Modest scale of the monthly gain as recorded in the monthly Credit Union Consumer Sentiment Index suggests fears remain for many households, with cost-of-living a key issue

'Good weather at home may also mean some consumers feel they don’t have to spend on an expensive holiday, economist Austin Hughes said. Picture: Leah Farrell / RollingNews.ie

Irish Consumer confidence improved marginally in June as sunny weather and tentative signs that food and energy price inflation may have peaked eased some concerns around household finances.

However, the modest scale of the monthly gain as recorded in the monthly Credit Union Consumer Sentiment Index suggests fears remain for many households, with cost-of-living pressures remaining a key issue.

The index increased to 63.7 in June from 62.4 in May. This marginal gain is being seen as a limited easing of the concerns that drove the index to a 14-year low of 42.1 as recently as September.

The improvement in June reflected gains in three of the five elements of the sentiment index offset by declines in the other two.

There was an upgrade in the outlook for employment, while respondents were also in a better financial position today than they were a year ago. They also forecast they would be in a better position 12 months from now.

"While the June sentiment survey period saw some high-profile redundancy announcements, consumer thinking on the health of the Irish jobs market appears to have been bolstered by a continuing stream of new job announcements and some exceptionally strong official data," economist Austin Hughes said.

Numbers at work in the first quarter of 2023 were reported to be 103,000 higher than a year earlier and the unemployment rate for May was estimated at 3.8%, the lowest number in thirty-five years of monthly jobless data.

However, consumers' assessment of the general economic outlook weakened marginally in June after a notable upgrade in May. 

"Ongoing uncertainty about global economic prospects, contrasting views on the correct setting for domestic fiscal policy — with widely different implications for the upcoming budget — and a further ECB interest rate increase during the survey period likely contributed to a still dominant view that the year ahead will remain challenging."

Hughes also said the good weather in June could also be a factor in a more positive outlook. "Good weather might be expected to affect consumers' views of their own circumstances rather more than their assessment of ‘macro’ conditions which are both more distant and more clearly defined. 

"At the margin, good weather at home may also mean some consumers feel they don’t have to spend on an expensive holiday," he said.

The Credit Union Consumer Sentiment Index also surveyed the public's views on holidays. The results show Irish consumers' main holiday spending will be curtailed somewhat this year. 

The number who say they cannot afford to go on holidays has risen to 27% (the largest share of responses) in 2023 from 19% in 2021 and 23% in 2022.

A small but not insignificant 8% of consumers reported they planned to increase their holiday spending because they felt needed a break more because of the strain of cost-of-living pressures. 

A further 25% of those surveyed say cost-of-living pressures will not affect their holiday spend.