The economic recovery is still failing to generate a “feelgood factor” because household incomes are not rising significantly, according to the country’s leading consumer sentiment survey.
The latest report from KBC Bank and the the Economic and Social Research Institute (ESRI) found its consumer sentiment index slipped in May to its weakest level since last December.
“While Irish economic conditions are improving, this is not translating into broadly based and palpable gains in consumers’ financial circumstances,” said KBC chief economist Austin Hughes. “In turn, this means that sentiment and household spending lack a feel-good factor that would encourage sharper increases in these areas.”
Mr Hughes suggested “lacklustre” income tax receipts and poor car sales may be telling a similar story.
The slip here contrasts with similar surveys which show a modest increase in the eurozone and the US.
Around a quarter of Irish consumers say their finances have improved, but a further quarter of the survey said their living standards had gotten worse.
“It may seem strange that Irish consumers are more sensitive to the risk of an economic setback than to the reality of relatively robust growth at present,” said Mr Hughes. “This is largely a legacy of the recent downturn. In part, this reflects understandable fears.
“At a more basic level, it’s simply because the current financial circumstances of many Irish households mean they can’t afford not to be nervous. Some sense of the limited nature of the turnaround in household finances is indicated by the table.”
With consumers remaining cautious, Daniel Foley at the ESRI said that they appear to be concerned about the outlook for the economy.
“The May sentiment reading hints at an Irish consumer who is more influenced by the risks posed by an uncertain economic outlook than the reality of a string of strong Irish economic indicators of late,” said Mr Foley. “This partly reflects painful memories of the recent global downturn but it likely owes more to the fact that continuing pressure on household finances simply means many consumers can’t afford not to be nervous.”
© Irish Examiner Ltd. All rights reserved