The labour market has been a driving factor in the improvement of consumer sentiment, which has hit its highest level in nearly seven years.
That is according to the ESRI, whose Consumer Sentiment Index with KBC Ireland increased to 84.6 in January, the highest level seen since May 2007.
A combination of an increase in spending on durable goods and confidence in the hiring helped to push consumers’ sentiment up, said Kevin Timoney of the ESRI.
“Every year of the survey has begun with a boost to the buying climate for durable consumer goods, supported by the January sales,” he said.
“This month saw the component improve to a four-year peak. Improved perceptions for the labour market over the coming year also contributed to the increase in sentiment.
“However, household perceptions of their current financial situation worsened somewhat compared to December.”
Ibec’s Business Sentiment Survey will further boost consumer sentiment with the group reporting that is expects to see significant jobs growth in 2014.
Head of policy and chief economist Fergal O’Brien said the recovery in the labour market is under way.
“A significant number of companies, in both the domestic and export market, plan to take on new staff. This should lead to further reductions in unemployment, on the back of already very positive job growth last year. We now expect a similar number of jobs to be created this year,” he said.
Despite the good news emerging from a number of sectors, Austin Hughes of KBC Bank said the February reading for consumer sentiment will probably fall due to seasonal factors.
“About 70% of the rise in the sentiment index between December and January is due to a largely seasonal boost to spending plans that reflects the influence of Christmas sales.
“There is likely to be some reversal of this factor in the February data that might even mean a weaker reading overall this month. However, we think the underlying trend in consumer sentiment is still modestly positive and any setback is likely to be temporary.”
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