Irish consumer sentiment lifts slightly as inflation moderates

Irish consumer sentiment rose fractionally in February as mild weather, lower pump prices and a more resilient Irish economy lifted the mood, the latest Credit Union consumer sentiment index indicated.

This was the fourth improvement in sentiment in the past five months.

“The modestly improving trend in confidence of late hints that we may have moved past peak fear in relation to consumers concerns around cost-of-living pressures and the threat of markedly weaker economic conditions,” the report’s author Austin Hughes said.

The index rose to 55.6 in February, up from 55.2 in January. However, the report cautioned that an increase of this magnitude does not suggest any material change in the mood of Irish consumers this month.

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The February 2023 reading is also well below that of a year ago, when the index stood at 77 just before the Russian attack on Ukraine, reflecting the impact of that shock on the cash and confidence of consumers.

Consumer confidence globally remains quite subdued as pressures on household finances remain substantial and recession fears persist

—  Austin Hughes, author of Credit Union report

Mr Hughes noted that an easing in official inflation figures may have helped sentiment but with an overall inflation rate of 7.8 per cent in January and double-digit increases in high-profile areas such as food (+12.8 per cent) and energy (+33 per cent), the financial circumstances of many Irish households remain strained.

The modest increase in sentiment here mirrored gains in similar confidence measures for the US and the EU. “This hints at the role played by easing energy costs globally as well as a modest pullback in inflation rates,” Mr Hughes said.

“That said, consumer confidence globally remains quite subdued as pressures on household finances remain substantial and recession fears persist,” he said.

Offsetting movements

The improvement in sentiment here was the result of offsetting movements in the key components that make up the survey.

While consumer thinking on the 12-month economic outlook weakened, sentiment in relation to jobs and consumers assessment of the change in their household financial circumstances through the past 12 months both improved.

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The Central Statistics Office’s latest labour force survey showed sustained strong growth in employment in the final quarter of 2022.