Surprise rise in consumer sentiment

Irish consumer sentiment rose sharply in March according to the latest KBC/ESRI consumer sentiment index, though the index warned that April's data would reveal whether the reversal in consumer confidence is a longer-term trend.

The index increased to 59.5 from 50.3 in February - the strongest reading since last August.

In addition, the steep jump between February and March was the third largest monthly rise in the fifteen year history of the survey.

However, the March reading is still consistent with relatively weak outlook for consumer spending, with the 59.5 reading well below the series' long term average of 89.3. The corresponding figure for March 2010 was 61.9.

The March figures "could hint at least tentatively that consumers may feel the worst could be over for the Irish economy" the report states.

One contributing factor to the marked pick-up in consumer confidence in March may have been the appointment of the new Government, the authors noted.

They said the improvement was surprising considering that other countries such as the US  experienced broadly-based weakness during the same period. In addition, the rise took place during a period when living costs in Ireland were rising and the threat of higher interest rates emerged.

"It may be that Irish consumers are looking for a 'fresh start' under the new Government and feel that they have already braced themselves for a considerable amount of bad news" said KBC Ireland's Austin Hughes. "We should know relatively quickly whether the jump in March is pointing to an improving trend or is just a temporary blip as the April survey period incorporates the ECB rate rise, further upward pressure on oil prices and the latest estimates of the potential costs of Ireland's banking crisis."

The ESRI's David Duffy emphasised that any recovery in confidence remains tentative.

"The improvement in sentiment is due, in part, to a move from more extreme views to a more central or a neutral outlook by respondents, suggesting that consumers remain cautious in the present circumstances. Over half of consumers still expect higher unemployment over the next 12 months.”