Irish Consumers Stay Positive In April


Sentiment rises fractionally with index posting third increase in past four months.

Mixed details suggest no dramatic change in consumer thinking of late.

Survey hints consumers now take good news on economy for granted and are increasingly focused on prospects for their household finances.

Irish consumer sentiment held broadly steady in April but the broad picture remains one in which a gradually more positive outlook continues to take hold. Our sense is that consumer sentiment is no longer hugely influenced by expectations of strong ‘macro’ performance by the Irish economy. They are reasonably confident about the economic outlook but still cautious about their household finances.

Increasingly, the outlook for consumer spending power seems likely to determine whether confidence grows or fades in the year ahead. In turn, in the run-up to the next election this raises the question of how important a role ‘auction politics’ might play in the next twelve months. The significant gap between consumers' upbeat views on the Irish economy and cautious assessment of their own financial situation could make them susceptible to election-inspired promises of a significant improvement in their living standards.
The April data saw confidence in prospects for the Irish economy as a whole remaining intact while there was also a slight improvement in consumers’ views of their personal finances. However, continuing caution in relation to buying intentions argues that the increase in household spending in 2015 is likely to be decent rather than dramatic.

The KBC Bank Ireland/ESRI Consumer Sentiment Index increased to 98.7 in April from 97.8 in March. While still below the nine year high of 101.1 recorded in January, the monthly increase in sentiment in April is the third in the past four months. So, it seems that Irish consumers continue to sense a gradual improvement in their circumstances and see this building further in the next twelve months.

The marginal increase in Irish consumer sentiment in April reflected a rise in three components of the index and a decline in the remaining two. In each instance, the changes were fairly modest.  So, it would appear that no single factor emerged during the survey period that markedly altered Irish consumers’ views in relation to their economic or financial circumstances.

Indeed, current sentiment index readings might be interpreted as suggesting that Irish consumers almost completely discount the continuation of positive news on the Irish economy and some moderate improvement in their personal financial circumstances on foot of such strength. On this view, only a marked gearshift in Irish economic performance or a notably changed view of what that performance could deliver in terms of household spending power might be expected to prompt a dramatic movement in consumer sentiment from current readings.

A sense that consumers are no longer hugely affected by upbeat reports on the Irish economy is suggested by a marginal weakening in sentiment in relation to Irish economic prospects in the April reading. This occurred in spite of positive assessments by the IMF, the Central Bank, IBEC and the Nevin Economic Research Institute among others during the survey period. So, it seems that good news on the broad economic front is now taken as a given whereas a couple of years ago it might have had a substantial effect on confidence.

It should be emphasised that decline in this element was fractional and the balance of opinion on the economy remains strongly positive- 57% of Irish consumers expect the economy to strengthen in the year ahead compared to just 12% that envisage a weakening in economic conditions. Responses in the March survey split 62% to 13% on this topic. So, a notably increased number of consumers expect ‘no change’ in the Irish economy in the next twelve months. Our sense is that these responses shouldn’t be interpreted as an expectation of flat GDP. Instead, it likely reflects a judgement that the economy will continue on its current trajectory in terms of the pace and nature of the upturn.

This non-exhaustive information is based on short-term forecasts for expected developments in the economy and financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalised investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a judgment as of the date of the report and are subject to change without notice.