‘Seasonal switch-off’ boosts Irish consumer sentiment despite uncertain outlook

Irish consumer sentiment rose in January on the back of lower fuel prices and better domestic economic data, the latest Credit Union Consumer Sentiment Index indicates.

The more favourable reading was also linked to the introduction of cost-of-living supports and “a seasonal switch-off from business and political news”.

The index rose from 48.7 in December to 55.2 in January, putting it at its strongest level since last June. The 6.5-point lift was the largest since January last year.

The improvement in sentiment here mirrored gains in the US that are likely to have reflected falling fuel costs, and in Germany, where fiscal supports may also have played a role.

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In contrast, UK consumer confidence weakened in January, reflecting growing negativity about the economy and concerns about the health of the public finances.

“Our sense is that the switch over Christmas and the New Year away from the normal routine, to less news-focused time spent with family and friends, may have eased consumer concerns somewhat,” the report’s author, Austin Hughes, said.

“However, at 55.2, the current consumer reading is some significant distance below the 85.6 point average of the now 27 years of Irish consumer sentiment survey data.

“This suggests Irish consumers remain very much aware of the economic and financial challenges that the new year holds.”

[ January 2022: Irish consumer sentiment lifts with easing of pandemic fears ]

The report showed that all five main components of the consumer sentiment survey – current conditions, consumer expectations, general economic outlook, outlook for employment, and personal financial situation – also showed improved readings in January relative to December.

However, all five were much weaker than they were a year ago, reflecting the uncertain economic climate.

The strongest month-on-month changes were in those elements of the survey focused on household finances, rather than the broader economic climate, Mr Hughes said.

“This balance may suggest that many consumers feel they weathered the financial demands of Christmas better than feared, while perhaps also benefiting from paying reduced attention to economic developments over the holiday period,” he said.

“Finally, the receipt of fiscal supports in the form of energy bill credits and ‘Christmas bonus’ welfare payments may also have assisted in the upgrade to the outlook for household finances.”

The January survey also asked consumers how they expected a number of key economic metrics to develop on a five-year view.

While views were broadly balanced as to whether economic growth will be stronger or weaker than in five years’ time, sentiment was “markedly weaker assessment than that of a year ago”.