Consumer sentiment in February dropped four points, unwinding about a third of the previous month’s gains, according to a new report, but there is a sense that Irish consumers felt the difficulties they have faced of late are lessening.
The Irish League of Credit Unions Consumer Sentiment Survey posted a three-year-high surge in January. February saw the reading come back four points to 70.2. But aside from that previous month, the February figure is the highest since the Russian invasion of Ukraine two years ago.
Economist Austin Hughes said the pullback in Irish consumer confidence was “a not entirely surprising partial correction” following an unusually large improvement recorded in January.
“Against a challenging economic backdrop, most consumers face continuing cost-of-living pressures as inflation is retreating rather than reversing,” he said. “So, a straight-line surge in sentiment is not to be expected.
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“Encouragingly, the fact that the drop in consumer sentiment unwound only about a third of January’s gains suggests that Irish consumers sense some lessening in the difficulties they have faced of late.”
However, he said there was still “little sense of emerging tailwinds” that would prompt a sustained positive surge in sentiment.
“The road from what has been a pronounced ‘feel-bad’ to even a tentative ‘feel-good’ could be long and bumpy given the large run-up in prices Irish households have endured in recent years as well as the threatening geopolitical landscape and unclear economic outlook.”
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Irish consumer sentiment has fallen between January and February in eight of the past 10 years, likely for seasonal reasons. The underlying trend, as signalled by the three-month moving average of sentiment readings, continues to move in a broadly positive direction.
Moreover, with the February monthly number above the three-month average, there is optimism that the trend improvement should continue next month. That said, it remains the case that current sentiment readings remain well below the 28-year long-term average of the survey.
“Putting these statistics in context, our broad takeaway is that Irish consumers seem to sense that the difficulties they have faced through recent years are gradually easing but there is little sign they are anywhere near over,” said Mr Hughes.
“The general tone of survey responses suggests many Irish consumers feel they remain in a fairly difficult situation and are some significant distance from where they would like to be in terms of a sustained and significant improvement in living standards.”
While the fall in Irish consumer sentiment was modest, it was broadly based. The smallest drop in the five main elements of the survey came in relation to the general economic outlook.
“To some extent, this reflects the fact that this element has seen a more modest improvement than other aspects of the survey reflecting continuing concerns about the global economy as well as the impact of tech sector adjustments on the Irish economy,” said Mr Hughes.
February also saw a comparatively large pullback in sentiment on employment, with numerous reports signalling the likelihood of future lay-offs despite official data painting a relatively stable and positive picture on unemployment.
February featured warnings of further rounds of global cutbacks from a range of multinationals with significant headcount in Ireland including Google, Microsoft, PayPal, eBay and TikTok. Domestically, there were media reports on prospective job cuts at a number of high-profile companies, including Glen Dimplex, Kerry Group, Mediahuis and Three Ireland.
With multiple reports of closures in the cafe and restaurant sector adding to a sense of job vulnerabilities, Mr Hughes said it was “scarcely surprising” that this area of the survey saw a decline in February.
“Indeed, considering the recent news flow, the weakness in this part of the survey might be considered reasonably limited, a result that seems to be consistent with the health of the jobs market in Ireland,” he said.
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