Consumer sentiment increases

Irish consumer sentiment surprisingly improved last month as households become slightly more optimistic, according to the KBC Ireland/ESRI Consumer Sentiment Index.

The survey results for Ireland mirror similar rises in sentiment in the US, Denmark, France and Germany.

The monthly measure of consumer sentiment rose to 46.8 in April from 44.2 in March, the first monthly increase since last December.

Austin Hughes, chief economist at KBC Ireland, said the improvement was quite a surprise.

“Not only was there a very tough budget but there were also some notable job losses. We should be cautious not to make too much of one month’s results but, taken at face value, the April sentiment reading points towards a greater measure of resilience among Irish consumers than might have been expected.”

The April index was conducted during the first two weeks of the month and so included the Budget and also job losses by Dell and Schering Plough.

Mr Hughes cautioned the reading should not be read as a turning point and may reflect the fact the Budget was not as tough as had been feared and the fact that for most taxpayers the full impact of the changes will not be obvious until their May pay packets.

“It should be remembered that lower interest rates and price cuts across a wide range of areas are helping Irish consumers handle what is without doubt an extremely difficult economic climate,” he said.

“Although we should await confirmation in next month’s survey, it would be surprising if Irish consumers completely underestimated the impact of the recent budget on their household finances,” he said.

A series of interest rate cuts by the European Central Bank since last October has supported consumer sentiment through particularly through lower mortgage repayments.

David Duffy, economist at the ESRI, said that while sentiment improved last month its remains close to its lowest levels.

“The index of current economic conditions fell slightly to 75.1 from 76.2 in the previous month. However, the forward-looking expectations index rose to 27.7 compared to 22.5 in March.”

He said consumers remained concerned about their current household finances with almost half saying they were worse off than a year earlier.

The consumer index is composed of two sub-indices; one measuring reaction to present economic conditions and the other on how consumers view their prospects in 12 months.