Cost of living concerns ease as Irish consumers eye Trump presidency

There has been “a clear easing” in cost-of-living concerns among Irish consumers, but some nervousness around spending remains due the economic challenges posed by the election of US president Donald Trump, new data shows.

The consumer sentiment index for January, compiled by economist Austin Hughes for the Irish League of Credit Unions, shows consumers were a little less concerned about their household finances in January, but slightly more cautious about the economic outlook.

Job prospects were a particular concern, and “may have contributed” to a pullback in spending plans. “However, the fractional uptick in consumer sentiment suggests Irish consumers feel the worst of the cost-of-living crisis is behind them,” said Mr Hughes.

That being said, consumers are now bracing themselves for a “turbulent and threatening geopolitical climate” on the basis of the campaign promises made by Mr Trump.

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January had an index reading of 74.9, which was marginally up on the 73.9 reading for December to bring it back to its best level in six months. It was also its joint highest level since early 2022 when sentiment began to tumble as Russia invaded Ukraine.

However, the January sentiment reading is still well below the long-term series average, suggesting that “while one set of pressures are easing”, Irish consumers are “very conscious that another substantial risk may just be unfolding”.

“Against this backdrop, the marginal gain in January 2025 speaks of a still nervous Irish consumer,” said Mr Hughes.

Three of the five main elements of the index were weaker than December, while two recorded stronger readings. Irish consumer thinking on the general economic outlook and on the outlook for jobs in particular weakened compared to December.

The January index saw consumers downgrade the outlook for jobs substantially more than the general economic outlook.

“In circumstances where measurement of multinational activity in Ireland is clouded by a range of statistical issues, the ebb and flow of jobs in multinational companies, both directly and downstream, may be seen by consumers as the most obvious and immediate indicator of changes in the temperature of the multinational sector,” said Mr Hughes.

“While the January survey period saw a fractional rise in the unemployment rate and reports of a material decline in job openings and a rise in job seekers in late 2024, our sense is that these developments were dwarfed by concerns around prospective US policy changes and their impact on the Irish economy.”

January saw a significant improvement in consumer thinking both in relation to how their household finances had evolved over the past 12 months and how they may develop in the year ahead.

“Although the period saw a marginal increase in motor fuel and heating oil prices, it also saw cuts in mortgage rates and strong indications from ECB officials of further interest rate cuts to come,” noted Mr Hughes.

“Arguably of greater significance, January saw the arrival of the increases in social welfare rates and tax credits announced in the Budget as well as the payment of the second instalment of the energy credit.

“With inflation markedly lower than a year ago, the survey may be capturing a still tentative sense that incomes are now rising at a faster pace than outgoings for many households.”

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