Slim rise in consumer confidence

There has been a marginal improvement in consumer sentiment as Irish people believe that they will have more money in the near future.

The results of the KBC Ireland/ESRI Consumer Sentiment Index increased to 61.2, from 58.9 in April, however, the average for the first quarter of the year remained unchanged at 60.

But only 10% of the 800 consumers surveyed expected to see an improvement in their personal financial situation in the coming year compared to 56% who see a further weakening.

The ESRI’s Kevin Timoney said that there was increased optimism about the Irish economy and employment.

“Better expectations for future household finances over the coming year were the main driver of the improvement in sentiment this month, following three successive monthly declines.

Expectations for the general economy and unemployment were also improved.

The purchasing climate for large household goods was felt to be slightly more muted than in April,” he said.

The chief economist with KBC Bank Ireland, Austin Hughes said that although there has been marginal improvement in overall economic conditions it hasn’t resulted in consumer sentiment staying flat for the first three months.

“A broadly stable sentiment reading for May suggests Irish consumers remain cautious. While they may read or hear of an improvement in some economic indicators, this hasn’t translated into more meaningful measures such as their own financial situation.

“At the margin, the cut in ECB interest rates and low Irish inflation helped sentiment in May, but Irish consumers still lack any ‘feelgood’ factor along the lines hinted at in recent US and German consumer confidence data,” he said.

Mr Hughes said that the Government needs to take into account how fragile the recovery in Ireland has been when designing the next round of budget cuts.

“The fragile nature of household finances should influence the design of Budget 2014.

“While most consumers are braced for further pain, a slightly smaller adjustment than previously envisaged might reduce downside risks to sentiment and spending later in 2013 and into next year.

“Although budget targets can’t be compromised, it is the Irish economy’s growth trajectory that will ultimately decide its capacity to exit the bailout.”


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