Consumer sentiment declines

The surprise jump in consumer sentiment experienced in January appears to be have been short-lived, with the latest index showing that consumer sentiment fell again in February.

The KBC Ireland/ESRI Consumer Sentiment Index fell to 59.4 last month down from a two-year high of 64.6 recorded in January. This compares to an all time low of 39.6 in July 2008.

Consumer sentiment unexpectedly rose to its highest level in two years in the first month of 2010, stoking hopes of an improvement in the mood of Irish consumers.

Tthe ESRI’s David Duffy said the fall off in February was expected.

“Some weakening of consumer sentiment was anticipated at the time of the improvement in January. In the past consumers have become more positive about purchasing major household items every January, reflecting, at least in part, the winter sales, followed by a more subdued figure in February.”

The report also noted that the weakening in Irish consumer sentiment last month mirrored drops in similar indicators in a number of other countries such as the US and Germany.

KBC economist Austin Hughes said that despite the drop last month, the underlying trend is improving modestly.

"The surprise in the February survey is that consumer sentiment seems to have held up reasonably well.”

Although the February reading of 59.4 was still well below the 14 year survey average of 91.8, he pointed out that the buying climate was still stronger in February than in the latter stages of 2009.

“The sharp decline in Irish consumer spending may be coming to an end although the survey doesn't point towards any prospect of a dramatic rebound anytime soon."