Consumer sentiment has reached its highest level in three years, following a sharp jump in July, according to the monthly IIB/ ESRI survey. Growing optimism about the outlook for jobs was the key factor behind the improvement, though consumers remain cautious about their personal finances.
The IIB/ESRI consumer sentiment index rose to 96.6 in July from 90.1 the previous month, with improvements in all the main areas it measures. The July jump follows a period of broadly stable readings since April.
Overall, the survey's authors say that recent findings indicate that sentiment is firmly on the upswing. However, they point out that it remains well below the "Celtic Tiger period".
The average reading during the 1996-2000 boom was 119. The latest readings, in contrast, show continued caution in many areas and indicate that "a boom is still some distance away. Instead we are still in the foothills of the recovery".
The index has now risen sharply from its low point of 60.9 in July of last year, when considerable uncertainty surrounded the economic outlook and a number of major redundancies had been announced.
Improvement in the jobs outlook has been a key factor in boosting sentiment. Reflecting this, the part of the index that measures expectations about the future performance of the economy has risen sharply. Sentiment in this area is now at its highest level since June 2001.
In the July 2003 survey, seven out of eight Irish consumers were fearful of a rise in unemployment. A year later, this has dropped to close to two in five consumers, according to the survey. However, there are still more expecting unemployment to rise than anticipating a decline.
"The dramatic change in consumer sentiment in relation to the Irish jobs market in the past year has closely mirrored the decline in numbers on the live register over that same period," according to the announcement.
As such the July sentiment reading augurs well for upcoming unemployment data as well as corroborating recent evidence of a decline in redundancies.
There was also a marked improvement in household expectations about their own finances, though many remained cautious. The number expecting a deterioration in their financial situation in the coming year dropped to 20 per cent in July from 23 per cent in June, but the number expecting an improvement remained static at 22 per cent.
The survey's authors said they "would interpret these findings as suggesting that fears about a sharp weakening in household income are easing as the general economic outlook improves, but Irish consumers do not expect the economic upturn to deliver a dramatic improvement in the spending power anytime in the near future." This caution means that consumer spending may be slow to recover, they believe.
