From the perspective of the average Irish consumer, the economic recovery has significantly overpromised and under-delivered in the past year. This is according to the latest KBC Bank Ireland/ESRI Consumer Sentiment Index for December 2016.
Although, the monthly drop in Irish consumer sentiment was reasonably modest in December, it was sufficient to push the index to its lowest level since February 2015.
The survey period did not see any dramatic developments that might signal a markedly weaker outlook for the Irish economy or any major deterioration in the financial circumstances of Irish households.
However, there was a considerable focus on potential threats to the Irish economy posed by Donal Trump’s election in the US and the looming start of ’Brexit’ negotiations in early 2017. Without any countervailing positive surprises through the survey period, these risks were sufficient to cause consumers to further downgrade their assessment of the general economic outlook as well as their own financial circumstances.
The consumer sentiment index is still consistent with a continuing increase in consumer spending but the flagging momentum of the sentiment index testifies to the marked absence of a widely felt ‘feel-good factor’ that would typically move confidence and Irish consumer spending onto an even stronger trajectory. As such, the survey is signalling that, from a consumer perspective, the Irish economic recovery is not rooted as deeply or as broadly as had been expected.
The KBC Bank Ireland consumer sentiment index slipped to 96.2 in December from 97.8 in November. While this was a relatively modest drop, some sense of how disappointing 2016 was in terms of the expectations of Irish consumers is hinted at in a comparison with the December 2015 reading of 103.9.
Commenting on the results, Austin Hughes of KBC Bank Ireland said, "It is important to emphasise that, at current levels, the sentiment survey isn’t signalling any dramatic deterioration in Irish economic conditions. Instead, it is signalling increased uncertainty about the economic outlook both in relation to looming risks posed by Brexit or policy changes in the US as well as its capacity to translate into improvements in consumers’ own personal financial circumstances.”