Rise in Dublin consumer sentiment reflects optimism in economy

Dublin consumer sentiment improved sharply in early 2015 as optimism about economic conditions increased and the outlook for jobs brightened.

The KBC/ESRI Dublin Consumer Sentiment Index rose to 148.9 in the first quarter of 2015 from 132.1 in the final quarter last year.

Consumers now expect stronger macro economic conditions to translate into an improvement in household finances in the next 12 months. The survey hints at an expected broadening of the recovery in the capital.

In the first quarter of 2015, the index reached its highest level in the 12 years for which comparable data are readily available.

The survey focuses on emerging trends rather than absolute measure of confidence with latest results suggesting Dublin consumers feel the change in their personal financial circumstances, while broader economic conditions are seen to be developing in a particularly favourable manner.

Trends in consumer sentiment in Dublin follow a broadly similar trend to those in the national sentiment survey.

Better Dublin Sentiment Largely ‘Macro’ Driven

As with the national survey, the improvement in sentiment in recent years has primarily come about because Dublin consumers sense the economy as a whole is improving.

However, results for the first quarter of 2015 show a notable improvement in expectations for household finances in the year ahead, presumably driven by the end of austerity budgets and anticipation growth in incomes will outpace inflation.

The most recent assessment by Dublin consumers of emerging economic developments hints at continued strong economic growth in 2015.

The jobs component of the survey saw the sharpest decline through the downturn reflecting the scale of layoffs and associated employment concerns. Encouragingly, this element has also seen the sharpest improvement in the more recent recovery phase.

The early 2015 sentiment reading points towards continued strength in employment growth in Dublin through the coming year.

Dublin Household Spending Power Has Been Constrained

Dublin consumers’ assessment of their current financial circumstances closely matched the sharp drop in spending power through the downturn.

Dublin consumers’ expectations for their household finances over the following months have tended to move in a broadly similar direction to the trend in the capital’s house prices. This likely reflects the importance of confidence to the housing market and the broader relation between purchasing power and the health of the housing market.

In recent quarters the expected improvement in Dublin consumers’ spending power has been far more modest than the trend in Dublin property prices. This reflects relatively modest income growth, continuing pressures on spending power and the particular buoyancy of Dublin housing prices.

The early 2015 buying climate points towards a somewhat healthier pace of growth in the spending of Dublin consumers in the next 12 months.