The mood of Irish consumers has been as gloomy as the weather this month, with the latest KBC Bank consumer sentiment index showing a buckling in confidence amid ongoing nervousness about the uncertain economic climate.
The index fell to a reading of 77, down from 81.9 in January, reversing most of that month’s improvement as Covid restrictions eased, although there was a sign of increased optimism about job prospects.
"While wind and rain lashed Ireland in February, an increasingly stormy economic and financial outlook prompted renewed weakness in consumer sentiment," said KBC Bank Ireland chief economist Austin Hughes.
Mr Hughes said the “relatively contained” drop in sentiment was because Irish consumers have been largely “defensive” in their thinking for a considerable period.
The modest extent of the monthly fall was also “due to the fact that although living cost strains have intensified of late, they have been a source of concern for consumers for some time”, he added.
While developments in Ukraine pose downside risks, the extent and duration of the difficulties they may cause for Irish consumers "remains very unclear".
Increases in housing costs and consumer prices likely weighed on consumers’ minds during the month, with all elements of the survey relating to household finances showing “consistent downgrading” compared to January.
Upswing exclusion
“At the margin, media reports of an emerging consumer boom likely heighten a sense of exclusion from an economic upswing for many consumers that further depresses their assessment of their own financial circumstances,” Mr Hughes said.
However, the jobs element of the survey, which is based on a nationally representative sample of 1,000 adults, saw a “clear and material” improvement in February that Mr Hughes said likely reflected anecdotal as well as statistical reports pointing to strong positive momentum in the Irish jobs market.
More consumers expect unemployment to fall than rise in the coming year, contrasting unusually with their expectations for the economic outlook in general, with twice as many consumers expecting the Irish economy to weaken in the next 12 months as expect it to strengthen.
