Interest rate cuts and lower fuel prices push up consumer sentiment 

Economist Austin Hughes said Irish consumers seemed more keen to see policies that promised a sustainable positive path for living standards rather than 'large and accordingly less sustainable measures'.

A cut to interest rates and lower fuel prices has led to a material increase in consumer sentiment, but the high cost of energy still weighs on nearly a third of consumers, the latest Credit Union Consumer Sentiment Index shows.

Earlier this month, the European Central Bank cut interest rates by 0.25% — marking the first time since they were increased to try and tackle inflation.

In the index’s analysis, economist Austin Hughes said the mood of Irish consumers “brightened markedly” during this month as falling energy costs, lower ECB rates and several encouraging economic indicators “prompted a more favourable assessment of the outlook for household finances and the broader Irish economy”.

The consumer sentiment index stood at 70.5 this month, up from the May figure of 65.7. However, it is still some distance below the long-term average of 84.5.

According to the survey conducted for the index, there were month-on-month improvements in June across four of the five areas examined. The exception was the outlook for jobs, which fell fractionally.

“While the labour force survey for the first quarter of 2024 showed continued growth in employment, the pace was notably more modest than had been the case previously,” Mr Hughes said.

“An improvement in the multinational sector activity prompted a rebound in gross domestic product in early 2024 and, arguably, of greater importance, buoyant tax revenues for May across a range of headings suggest growth in incomes and spending as well as a recovery in corporation tax receipts,” Mr Hughes said.

“Developments such as these appear to have encouraged an easing in consumer concerns about the economic outlook.”

Among the other factors cited for the uplift in sentiment include lower fuel costs, an easing of food price inflation, and the cut in interest rates.

In relation to the prospect of a giveaway budget, Mr Hughes said Irish consumers seemed more keen to see policies that promised a sustainable positive path for living standards rather than “large and accordingly less sustainable measures”.

The survey also asked people about their living expenses, with four in 10 consumers surveyed saying their household income is now above living costs. However, one in four said their current income was inadequate for living costs.

What's your view on this issue?

You can tell us here

High energy bills was cited as the biggest difficulty for 31% of people, while 19% said it was their grocery bills.

Energy prices remain nearly 44% higher than they were three years ago, with food prices more than 20% higher over the same time period.

For 16% of consumers, housing costs were the main source of financial pressure at present.

Mr Hughes said these responses suggesed the accumulated cost increases seen over the last few years were “still putting significant pressure on many households” and although many households were now either seeing incomes slightly above or in broad balance with their spending, in most instances, they are “still facing difficulty meeting some bills”.