Irish consumer sentiment has declined over the past month, with a large majority of households saying that they are feeling the pinch amid stubbornly elevated prices.
Just 7 per cent of around 1,000 respondents to a survey conducted by Core Research on behalf of the Irish League of Credit Unions said they have not felt the impact of inflation. However, 91 per cent of consumers said that the cost-of-living squeeze had worsened.
Of that cohort, 56 per cent said they were managing to cope but a sizeable 35 per cent said they were struggling.
The report’s author, economist Austin Hughes, said that of the group of respondents who said they were struggling with higher household costs, about half said higher inflation has had “a substantial impact on their household finances while the remainder reported a smaller impact”.
“However, the latter group may have had a more precarious financial position and even a modest change in their circumstances may have been sufficient to markedly alter the sustainability of their position,” he said.
In circumstances where negative financial newsflow dominated the survey period by quite a margin, the drop in consumer sentiment this month could probably be regarded as relatively modest
— Austin Hughes, economist and author of the report
Overall, the consumer sentiment index softened in March to 53.9 from 55.6 in February.
Mr Hughes said: “In circumstances where negative financial newsflow dominated the survey period by quite a margin, the drop in consumer sentiment this month could probably be regarded as relatively modest.”
The slight pullback in sentiment is only the second decline observed over the past six months, he said, and “should probably be seen as signalling that consumers are still very much aware of the substantial financial headwinds that they face in early 2023 rather than pointing to a marked darkening in the mood in Irish households of late”.
‘Feel-bad factor’
Nevertheless, he said there remained a clear “feel-bad factor” among Irish consumers despite a slight upgrade of consumer thinking on the Irish economic outlook and a pickup in mood around future household finances.
Consumers remained concerned about ongoing pressures on their household finances coupled with “increasing uncertainty about the global economic and financial outlook led consumers to downgrade their assessment of the buying climate further”, Mr Hughes said.
This fed through to generally negative feeling about the trajectory of inflation. A large group (47 per cent) of consumers said they expect cost-of-living pressures will worsen for their own households over the next 12 months.
While there is a strong consensus among professional forecasters that the rate of inflation will ease as 2023 progresses, there is no expectation that consumer prices will fall
— Austin Hughes
Some 36 per cent, meanwhile, said they expect the difficulties to remain the same, while just 7 per cent said they expect costs to come down over the next year.
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“In this context,” Mr Hughes said, “it is worth noting that while there is a strong consensus among professional forecasters that the rate of inflation will ease as 2023 progresses, there is no expectation that consumer prices will fall. So the cost of living will increase further and unless incomes rise faster than prices in the year ahead, cost-of-living pressures will worsen.”
Against this backdrop, he said that the broad judgment of consumers that these issues would worsen “seems justifiable”.
