Irish consumer sentiment fell in April 2017 compared to the same month last year as “increased caution about the outlook for household finances offset a slightly more positive view of prospects for the Irish economy”.
According to the consumer sentiment index produced by KBC Bank Ireland and the ESRI, consumers are a little less optimistic about household finances with only 1 in 4 reporting an improvement in their financial circumstances. However, the index also shows that consumer sentiment increased when it came to the outlook for employment and the general economic outlook.
"The April survey suggests that macro concerns eased as the immediate fallout from Brexit and Trump related concerns has been less than expected. However, with only one in four consumers reporting an improvement in their household finances, the scope for any substantial feel-good driven pick-up in consumer spending appears limited", said Austin Hughes of KBC Bank Ireland.
The report highlights that, while there may be a feeling that things are gradually getting better, there is little indication of anything approaching a boom: “caution is the most important characteristic of Irish consumer confidence at present” it says.
The dip in consumer confidence comes after Ireland’s annual inflation hit a four-year high of 0.7 per cent in March, while Euro zone inflation for the same month came in at 1.5 per cent.
Additionally, the sentiment drop counters recent trends in retail sales which rose by 3.2 per cent in March compared with the same period in 2016.
The sentiment in Ireland was broadly in line with wider sentiment as consumer confidence in the Euro area showed a modest improvement in April while UK consumer confidence declined for the third month in a row.
Fuel prices
"Households' expectations of their personal finances have noticeably worsened this month, decreasing by nearly 10 index points. The relatively optimistic outcome for the labour market and the economy is suggestive that other factors are driving the decline in expectations", said Daniel Foley of the ESRI.
Potential contributing factors to the worsening consumer assessments of their own household finances could be attributable to reports of higher fuel prices, high health insurance costs, and high profile industrial relations disputes that could have diminished expectations for pay growth, according to the survey.
Despite the negatives, the April survey suggested a pick-up in spending intentions. Although, the report suggests that this could be on the back of increased Easter-related outlays rather than a significant behavioural change.
In the months to come, caution could continue to hamper confidence according to Mr Hughes: "the effectively unchanged April reading suggests that the typical Irish consumer is still trying to navigate a very uncertain economic environment as well as dealing with widespread constraints on their household spending power. While there is a sense that things may be getting better, the improvement is still uneven and modest."
