Irish consumer sentiment weakened for the first time in five months in August as negative job news, a deteriorating global outlook and poor weather dampened the mood of consumers.
The latest Credit Union Consumer Sentiment Index fell to 62.2, down from 64.5 in July, on the back of what economist Austin Hughes said was “a distinct lack of economic and financial sunshine”.
The latest barometer of consumer confidence comes on the back of high-profile job loss announcements here from professional services firm Accenture and tech giant Microsoft. It also comes amid talk of another interest rate hike in September, further downside risks to the global economy from China and ongoing cost-of-living pressures.
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The pullback was not entirely surprising, Mr Hughes said. “Although the Irish economy and consumer spending power have avoided the collapse feared in the 14-year low seen in the survey in September 2022, the global economic outlook remains at very best uncertain, and many Irish households remain under significant financial pressure,” he said.
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“Poor weather could also have added to the gloom and contributed to the softest consumer confidence reading since April,” Mr Hughes added.
The outlook for household finances was the element of the survey that saw the largest monthly drop in August.
“Once again, consumers may be reacting negatively to the contrast between reports of falling inflation and their own experience of sustained upward pressure on their cost of living,” Mr Hughes said.
A relatively large drop in the jobs element of the survey likely reflected lay-off announcements, most notably those at Accenture, he said.
As part of the August report, the survey, which is compiled in partnership with Core Research, asked consumers a number of questions about the perceived effects of the nine increases in interest rates by the European Central Bank (ECB) since July 2022.
‘Very negative’
It found that roughly two out of three Irish consumers (63 per cent) believe ECB rate increases have had a negative impact on their household finances, with more than half of this group indicating the impact on their personal financial circumstances as being “very negative”.
Over 80 per cent see higher rates adding to cost-of-living pressures, with just one in 20 (5 per cent) saying higher rates would reduce cost-of-living pressures.
This suggests, the survey noted, that the vast majority of Irish consumers think the direct impact of higher borrowing costs will outweigh the more indirect restraining impact tighter ECB policy will have on demand and, consequently, on the pace of increase in consumer prices.
“One interpretation of the responses to special questions in the August Credit Union Consumer Sentiment Survey is that Irish consumers seem to feel that ECB rate hikes are hurting quite a lot, but they may not be working in terms of markedly altering the outlook for inflation,” Mr Hughes said.
