Irish consumer sentiment bounces back from Brexit dip

Irish consumer sentiment has bounced back from a month-long Brexit hangover.

The latest KBC Bank Ireland/ESRI sentiment index rose to 102.7 in August, reversing most of the 3.8 decline seen in July after the UK’s vote to leave the European Union.

The report said the absence of an immediate Brexit fallout combined with further data about the health of the Irish economy had buoyed consumers.

“The UK’s Brexit vote didn’t cause the economic sky to fall, even if it made it a lot cloudier,” KBC analyst Austin Hughes said.

“As a result, Irish consumers reassessed both the timing and extent of the damage that the UK’s exit from the EU might cause the Irish economy,” he said.

Feel-good factor

However, the latest survey noted the August reading merely matched the average of the previous 12 months, suggesting there was no broadly based “feel-good factor”.

The combination of elevated uncertainty about the future and continuing financial strains suggested many Irish consumers remain unwilling or unable to significantly increase their spending, it said.

Irish consumers were not alone in feeling cautious about their current circumstances, with August readings for comparable sentiment indicators in the US, the UK and the euro area all below their average levels of the past 12 months.

The report suggests this could be linked to both the global nature of current uncertainty and a strong sense in many countries that the average consumer feels they have not fully participated in any improvement in economic conditions.

As well as reflecting the absence of any Brexit-related deterioration, the relative pick-up in Irish sentiment coincided with encouraging census data and the Government’s action plan for housing and homelessness .

The report also noted the survey period saw a large number of new job announcements from companies as diverse as Lidl and Pfizer.

The recovery in Irish sentiment was also most pronounced in those areas that had suffered the sharpest reversals in July. Views on Irish economic prospects, for instance, improved notably last month having fallen in July.

Worldwide unease

"While the August sentiment reading suggests Irish consumers remain broadly positive in their thinking on the general economic outlook and their household finances, this survey and comparable confidence measures for a range of other countries also hint at a significant measure of unease on the part of consumers worldwide at present," Mr Hughes said.

“This owes something to increased uncertainty in light of unexpected events such as the outcome of the Brexit vote. It also seems to reflect a sense of disappointment at the limited gains the average consumer has experienced from the improvement in economic conditions in recent years,” he added.