Consumer sentiment up slightly but still below level before Iran war

The latest Credit Union Consumer Sentiment Survey has found improvements around economic outlook, financial conditions and expectations for the future

The survey showed a consumer sentiment index reading of 62.2 in June, an increase from the 59.4 in May. 

Irish consumer sentiment improved for the second month in a row but remains below levels seen prior to the war in Iran as there is still significant uncertainty over a lasting peace in the Middle East and the potential impact on energy prices, the latest Credit Union Consumer Sentiment Survey has found.

The survey showed a consumer sentiment index reading of 62.2 in June, an increase from the 59.4 in May. There has been a nine-point increase over the past two months but this is still below the 65.2 recorded in February.

The sentiment index is well below the long-term survey average of 83.2.

In his analysis of the survey’s results, economist Austin Hughes said sharp swings in consumer confidence over the past few months were “largely driven by changing perceptions as to the immediate impact of the war on Iran on households’ energy bills and the longer-term threats it posed to economic activity, jobs and spending power”.

“Although concerns have eased somewhat of late, there is still significant uncertainty about the delivery of a lasting peace deal in the Middle East while Irish retail oil prices remain somewhat higher than before the conflict began.” 

Mr Hughes said for these reasons, the June sentiment reading, while clearly pointing to an easing in concerns and slightly less threatening cost pressures of late, is still lower than at the start of the year.

“As a result, the sentiment survey currently signals a concerned and, in many instances, cash-constrained Irish consumer.” 

The improvement in Irish consumer sentiment in June was broadly based with four of the five main elements of the sentiment index posting month-on-month gains. Improvements were seen around economic outlook, financial conditions and expectations for the future.

“The improvement in Irish Consumer Sentiment in June was primarily driven by an easing in concerns around household finances although it should be emphasised that the balance of thinking in relation to household financial circumstances remained overwhelmingly negative in June,” Mr Hughes said.

The one area where there was a downgrade was in the outlook for jobs which Mr Hughes said was likely influenced by the late-May announcement that Meta would cut its Irish workforce by nearly 20%.

“Alongside survey data suggesting a drop in planned hiring and an ongoing focus on the threat to jobs from AI, it is scarcely surprising that Irish consumers have become more negative about the jobs market of late.” 

Mr Hughes noted that the June survey saw a number of “contrasting developments on inflation” with global oil prices easing — signalling that the shock is unlikely to be anywhere near as severe as that seen in 2022 and 2023 — and that the improvement likely reflects Government energy measures which shows that “the right policy can cushion the price blow to consumers”.

However, Mr Hughes said that the balance of consumer thinking on household finances “remains negative”.

“Looking forward, price pressures are likely to build further, with knock-on price increases across a wide number of goods and services from the recent surge in global energy prices. Increases in input and transport costs look set to boost food prices later in the year while the threat of scarcer energy supplies will weigh on the cost of heating and lighting homes as winter approaches,” Mr Hughes said.

The survey also asked people about their planned summer holiday spending plans. It found one-in-two consumers say they will spend the same or more on holidays than they did last year.

Another 16% said they would be spending less while 21% said they couldn’t afford to go on holiday.

The survey was undertaken by Core Research on a nationally representative sample of 1,000 adults.