Irish consumers are more optimistic than at any point since early last year, with falling energy costs – at least on wholesale markets – and an improved economic outlook lifting sentiment to a 13-month high.
The latest Irish League of Credit Unions consumer sentiment index suggests the Easter break and the 25th anniversary of the signing of the Belfast Agreement may also have contributed to a lift in consumer mood.
The index, conducted in partnership with Core Research, rose to 59.7 in April from 53.7 in March.
The 5.4-point month-on-month rise more than reversed the 1.7-point decline seen between February and March and points to a clear if constrained trend recovery in Irish consumer sentiment that began last autumn.
However, the gap between the current reading of 59.7 and the 27-year average of the sentiment series at 85.3 suggests any recovery in Irish consumer confidence “has still some distance to go before it might be considered fully formed,” the economist and author of the report Austin Hughes said.
The mood of the Irish consumer is dominated by uncertainty and caution and while fears of a full economic or financial meltdown may be fading, “many consumers still face significant uncertainty and substantial financial strains,” the study suggests.
The results hint at a two-track consumer economy, however, with notable increases both in consumers who are comfortable and consumers who are just clinging on as the cost-of-living crisis continues.
It suggests that while 44 per cent of consumers would use savings for unexpected financial difficulty – up from 34 per cent last year – almost one in five people say they have no way of handling financial emergency, compared with 7 per cent a year ago.
The largest improvement related to the outlook for employment while thinking on the broader outlook for the Irish economy also improved between March and April.
The continued rise in consumer prices means that cost-of-living pressures are continuing to increase rather than ease, according Mr Hughes.
“Encouragingly, all three elements of the sentiment survey related to household finances showed clear gains in April.
“The softer trend in energy costs of late, suggestions that borrowing costs might not rise as far as feared previously and a softer but still positive trend in house prices may all have contributed to a view that financial pressures would not worsen as much as had been widely expected,” he said.
“A still nervous and cash-strapped Irish consumer may be looking towards a glass that is starting to appear half full rather than one at imminent risk of being drained. In turn, this suggests that while the trend in consumer spending might improve, there is little sense that a major surge in spending is about to be unleashed.”
The resilience of the Irish economy through the past year has also seen a slight increase in the number of consumers able to deal with a financial emergency costing €1,000 from their current income to 14 per cent from 12 per cent a year ago.
“It might also be suggested that this financial wherewithal would probably allow these consumers undertake a significant step-up in spending if or when current uncertainties fade,” Mr Hughes said.
