Consumer spending ‘driven by caution rather than shortage of cash’

CONSUMER spending will become sluggish in the coming months, the IIB Bank/ESRI Consumer Sentiment Index for February indicates.

The index slipped to 62.3 in February, compared to 64.5 in January, and IIB Bank chief economist Austin Hughes said decline in February suggests that the trend in sentiment is clearly downwards but remains reasonably controlled.

“We reckon that caution rather than a shortage of cash is the key driver of Irish consumer sentiment and spending at present.

"While this is healthy, it suggests both spending and sentiment will remain sluggish in coming months barring a significant ‘shock’ to the economy.

"As a result, the trend in consumer sentiment is likely to be a key pointer to the impact of war in Iraq on the Irish economy,” he said.

Mr Hughes said the survey hints strongly that spending on big ticket items like cars will be particularly sluggish in the coming months.

ESRI economist David Duffy said: “The results for February indicate that consumer sentiment weakened following a slight improvement in January.

“The results particularly reflects consumers’ concerns with regard to the current economic situation.”

Mr Hughes said that the February data suggest sentiment in regard to the jobs market continues to weaken, with 82.4% of respondents expecting a further rise in unemployment, while only 6.3% expect an improvement.

The data for February was obtained from telephone interviews during the first two weeks of the month with more than 1,300 completed questionnaires.

The data were re-weighted in line with gender, age and level of educational attainment to ensure the data is fully representative of the national population of adults.