Rising property prices and low-to-negative inflation bolster confidence

Irish consumer sentiment hit a nine-year high in January as people expected that, for the first time in years, they would be better off in 12 months’ time, a survey showed on Thursday.

The survey’s compilers said rising property prices, low to negative inflation and recent tax cuts had probably bolstered confidence, good news for the government ahead of parliamentary elections in just over a year’s time.

The KBC Bank Ireland/ESRI Consumer Sentiment Index rose to 101.1 in January from 90.5 in December, well above its previous post-crisis high of 92.8 in September. It was the fourth- largest monthly increase since the survey began 19 years ago.

“The January survey shows that for the first time since mid-2007 more consumers expect their household finances to improve rather than worsen in the year ahead,” said KBC chief economist August Hughes. “This marks a notable change in thinking.”

“The details suggest the economic recovery should be more broadly felt in 2015 and this should prompt healthier household spending,” he said.

Ireland forecasts that its economy grew by almost 5 per cent in 2014, probably the fastest growth in the European Union, and data released in 2015 has shown unemployment falling further, tax receipts soaring and strong services and manufacturing growth.

The survey compilers noted, however, that January is typically a strong month for consumer sentiment and there was likely to be some seasonal influence at play.

Reuters