Dublin Consumer Sentiment improved significantly in the first quarter of 2016 to reach its highest level in the thirteen years for which regional sentiment survey data are now available. In contrast, confidence among consumers in the rest of Ireland was largely unchanged from the previous quarter which marked the series highpoint for that index.

The stronger trend in sentiment in Dublin than elsewhere in early 2015 may reflect a greater resilience to increasing concerns about global and domestic economic risks. Consumers in the rest of Ireland may feel that the recovery outside the capital is not as well established and any set-back to economic conditions may be more damaging to their circumstances in what is still an unevenly felt upturn. These results also suggest that  the sense of a two-speed recovery may remain a feature of the Irish economy for some time to come.

It should be emphasised that current readings still suggest the broad trend in consumer sentiment remains positive both in Dublin and in the rest of Ireland although somewhat uneven readings also hint at contrasting circumstances across households even in the same region. Views on household finances are becoming modestly more positive overall, both in the capital and elsewhere. Marginally more consumers say their financial circumstances improved in the past year than reported a deterioration and a notably more positive outlook is expected in the year ahead. In both instances, consumers in Dublin are somewhat more positive than their counterparts outside the capital.

Consumers in Dublin and elsewhere were a little less optimistic about the outlook for the Irish economy in the year ahead than they were three months ago, likely reflecting both global and local concerns. This downgrade was more pronounced outside the capital and this meant those consumers also downgraded their outlook for jobs while Dubliners were more confident about employment prospects in early 2016.

Key Data

Dublin Consumer Sentiment Improves In Early 2016 As Confidence Is Little Changed In The Rest Of Ireland

• Dublin consumers grew more confident in the first three months of 2016, raising the related sentiment index to its highest level for a series that stretches back to early 2003. Consumers outside the capital reported an effectively unchanged sentiment reading from the final quarter of 2015 which represented the peak reading for that index.
• As the graph across suggests, there has been a strong similarity in the broad trend in sentiment readings of consumers in Dublin and elsewhere throughout the history of the survey. This is not surprising in view of the scale and breadth of the changes in the Irish economy through this time. However, clear differences in results for specific quarters suggest the mood of consumers in the capital has diverged on occasion from that of their counterparts in the rest of Ireland.
• The difference in early 2016 might simply be a correction of the stronger trend  in sentiment outside the capital readings in the second half of 2015. An alternative interpretation might suggest a greater unease that any weakening in  Irish economic growth prospects would be more damaging in parts of the country where the upturn is felt to be more tentative.

  Consumers Become Less Certain About The Upturn?

• A sense that a strong ‘macro’ recovery was underway in the Irish economy was a key feature of the sentiment survey since 2011-well before consumers reported any improvement in their personal circumstances. More recently, even as official  statistics suggested an acceleration in the pace of economic growth, the sentiment indices hint that consumers are taking a slightly more cautious view.
• The Q1 2016 results show consumers in the capital and across the rest of the country were more negative about the Irish economic outlook than they were three months earlier. In circumstances where concerns about the health of the global economy have intensified, the possibility of the UK leaving the EU has become a clear and immediate danger and domestic political uncertainty intensified, this is not particularly surprising.
• The drop in consumers’ assessment of Irish economic prospects was somewhat larger outside the capital than in Dublin in the past three months. This may reflect an element of catch-up as Dublin readings were comparatively soft in the previous two quarters, perhaps reflecting  a greater sensitivity in the capital to international concerns during 2015.
• We also think the sharper downgrading of Irish economic prospects outside the capital of late may stem from a judgement that any prospective easing in Irish economic growth may have a greater adverse impact on those parts of the economy where the recovery is at an earlier and less established point.  It might also be speculated that domestic political uncertainty and Brexit might take a heavier toll on economic conditions in areas where activity is less diversified than in Dublin.

• Job Sentiment Improves Further In Dublin But Other Areas More Cautious

• After a marked weakening in sentiment on jobs in the third quarter reading, consumers in Dublin were more upbeat on employment in each of the past two surveys.  However, the trend in the rest of Ireland weakened for a second quarter. The upper graph across shows that Dublin consumers have consistently taken a more positive view on jobs than consumers in the rest of Ireland in recent years.
• These differences in sentiment regarding employment prospects occurred in spite of  broadly similar trends in jobs growth reported by households in and outside the capital in official data (see lower graph). This anomaly may reflect consumer perceptions of a greater depth and diversity  of job opportunities in the capital.  The more recent divergence  entailing a weakening of sentiment in the rest of Ireland in relation to employment may reflect a slower pace of jobs growth outside the capital of late.
• It should be emphasised that the first quarter reading still represents a reasonably positive assessment of the expected trend jobs market both inside and outside the capital. Some 58% of Dublin consumers expect unemployment to fall further in the coming year while just 14% see a rise in joblessness.
• Elsewhere, expectations for jobs are not as strong but 42% of consumers expect unemployment to fall while 25% envisage an increase in the next twelve months. Importantly, this represents the lowest share of positive responses to this question from consumers outside the capital in a year and, perhaps more significantly, the largest amount of negative responses  since the second quarter of 2014.
• Outside of Dublin, consumers’ views suggest that we are at a somewhat earlier stage in the jobs cycle and there may be a somewhat greater level of concern that the threat of a weaker pace of economic growth may be more damaging to employment prospects than in the capital.

• Household Finances On The Mend But Consumers Remain Cautious And Two-speed Recovery Still Suggested

• Consumers in Dublin and elsewhere were more positive in their assessment of how their personal finances had developed in the past twelve months in early 2016. Our sense is that this reflects the influence of Budget changes to taxes and social welfare. This likely owes more to the positive direction of these changes after a prolonged period of painful measures rather than the absolute amounts involved. Lower oil prices and generally subdued inflation as well as an easing in house price inflation may also have played some part.
• While the graph across might suggest a surge in spending power, the detailed responses to this area of the survey suggest otherwise. In reality, conditions vary considerably across households and only about one in four saw their financial circumstances improved in the past year. As the diagram across indicates even this outturn represents a marked improvement from the experience of recent years. This combination of circumstances goes some way to explaining why an Irish economy is booming according to key ‘macro’ indicators but a significant ‘feel-bad’ factor remains in place.
• In Dublin, 29% of consumers reported healthier household finances in the past twelve months while 22% reported  a deterioration. Outside Dublin,  26%  of consumers experienced an improvement in their personal finances compared to 25% that saw a worsening. As the diagram across indicates, even this ‘split’ outcome represents a marked improvement on the experience of recent years for consumers outside Dublin.    
• Dublin consumers are also more optimistic than their counterparts elsewhere in relation to their household finances in the coming year. Reflecting this and the more positive tone of other aspects of the survey, the spending plans of Dublin consumers were somewhat stronger than those of consumers in the rest of Ireland. So, while the broad picture remains positive, a greater element of caution of late on the part of consumers outside the capital hints that a two speed recovery may remain a feature of Irish economic conditions in coming months.

• Survey Notes

• This note describes a breakdown of Irish consumer sentiment into components focussed on Dublin consumers and their counterparts across the rest of Ireland. Data limitations preclude a more detailed breakdown of regions outside of Dublin at this time. Similarly, to ensure sufficient sample size, this breakdown is only possible on a quarterly basis. The starting point of the survey is 2003.
• The KBC Bank Ireland/ESRI Dublin consumer sentiment index is being released as part of the ‘Dublin Economic Monitor’ by the four Dublin local authorities. The index for the remainder of Ireland is presented for comparative purposes. It is envisaged that a short analysis of the latest trends in consumer sentiment indices for Dublin and the rest of Ireland will be released to coincide with future quarterly releases of the Dublin Economic Monitor.
• The KBC Bank Ireland/ESRI  consumer sentiment indices for Dublin and the rest of Ireland are quarterly series based on phone interviews with representative samples of consumers over the three months of the relevant quarter. As with the corresponding national survey, these regional sentiment indices are derived from responses given to 5 questions about the outlook for the Irish economy, the outlook for unemployment, recent and expected trends in household finances and the buying climate
• The data are obtained from telephone interviews during the first two weeks of each month of the quarter. The data are re-weighted in line with gender, age, economic status, level of educational attainment, region and household size to ensure the data was fully representative of the national population of adults. The sentiment index for Dublin is based on approximately 700 responses per quarter. The sentiment index for the rest of Ireland is based on approximately 1700 responses per quarter.
• The consumer sentiment index is calculated by computing the relative scores (the percentage of respondents giving favourable replies minus the percentage giving unfavourable replies (the balance), plus 100) for each question used in the different indices. Those who reply “Don’t Know”, “Remain the same” are excluded from the index calculations. Each relative score is rounded to the nearest whole number. The sum of the relative scores is then divided by the base period total for each index.