The latest KBC Bank Ireland/ESRI Consumer Sentiment Index has been released today and shows that Irish consumers remain broadly positive if a little less exuberant in their views of Irish economic prospects.
However, this month’s results show households remain divided and comparatively downbeat in their assessments of their personal financial circumstances.
The sentiment index fell to 98.1 in May from 102.7 in April. Although the monthly change is not dramatic, it does mean the May reading is the weakest since March 2015.
The three month moving average of the sentiment index, which serves as a measure of the recent trend declined for the third month in a row in May. So, recent sentiment readings clearly point to some weakening - even if reasonably modest in degree - in Irish consumer confidence of late.
The decline in Irish consumer sentiment in May was broadly based with all five components of the index posting lower readings than in April. Somewhat unusually, the two ‘macro’ elements of the survey posted the largest and smallest declines.
Consumers had already downgraded their assessment of the twelve month outlook for the Irish economy sharply in March. So, it is not entirely surprising that the May survey saw only a relatively small further decline in this part of the survey.
According to the survey, consumer thinking on Irish economic prospects remains positive. Some 49% of respondents to the May survey expect the Irish economy to strengthen in the next twelve months compared to 17% who envisage a weaker economy. This positive balance is the strongest across the five main questions in the survey.
However, there has been a notable scaling back of the degree of optimism in relation to the Irish economic outlook in recent months. The May ratio of roughly three positive responses to every one negative reply compares to a near six to one ratio in the January survey when 62% of consumers anticipated a stronger Irish economy against 13% who expected weaker conditions.
Chief Economist at KBC Bank Ireland, Austin Hughes said, "The drop in Irish consumer sentiment in May was not dramatic and, at current levels, the sentiment index is still consistent with a reasonably positive view of economic prospects. However, the details of the May reading point towards a more nervous consumer who is a little less confident in the outlook for the Irish economy and disappointed with the development of their own household finances."
He added, "The most notable area of weakness in the May survey was in relation to the outlook for jobs even though unemployment continued to fall and there were plenty of new job announcements during the survey period. We think that a nervous Irish consumer may have been more sensitive to several developments hinting at a more fragile jobs market such the threat of layoffs at Intel and industrial disputes at Luas and Tesco."
Source: www.businessworld.ie
