Consumer sentiment improves but mood still depressed as winter looms

Consumer confidence saw a “small uplift” in October, but the mood among the Irish public remained gloomy overall, the Credit Union Consumer Sentiment Index has found.

Measures in Budget 2023 offered a partial offset to the financial pressures and economic uncertainty that caused sentiment to tumble this year, but this easing of financial concerns was “limited”.

Sentiment overall is still “very weak”, with only 10 of the previous 320 readings in the near 27-year history of the index weaker than the current figure.

“Irish consumers are very gloomy about the circumstances they now face,” said economist Austin Hughes, analysing the findings.

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The index increased to 46.1 in October, up 4 points from September’s record low. But this represents only a part-reversal of the 11.3-point decline seen in that month.

“This likely reflects the fact that the pressures weighing on Irish consumer confidence remain formidable and seem set to intensify as winter weather emphasises how expensive energy costs have become.”

Mr Hughes said the impact on Irish consumer sentiment of recent developments in the UK — where prime minister Liz Truss’s now largely abandoned “mini-budget” sparked havoc on financial markets — was not completely clear-cut.

“To the extent that British economic policy problems weaken the UK economy, this would weigh on the Irish economic outlook, but there is not the same mechanically damaging spill-over that caused Irish consumer sentiment to slump during the Brexit process,” he said.

“On the other hand, it could be argued that high-profile UK policy difficulties may encourage Irish consumers to draw some comfort from a notably more stable, sustainable and supportive domestic economic policy stance in this country.”

On balance, the contrast between the broad support for Budget 2023 and the heightened divisions within UK policymaking “may have had some small positive influence” on Irish consumer sentiment in October, Mr Hughes concluded.

Irish consumers remain almost evenly split between those who see their household finances worsening in the next twelve months and those who see them holding steady. Only a negligible number of those surveyed expect any improvement in their finances in this period, making the buying climate “overwhelmingly negative” and pointing to constrained household spending in the run-up to Christmas.

This is the first sentiment index to be published by the Irish League of Credit Unions (ILCU), but it continues a data series that dates back to 1996.

ILCU has partnered with Core Research on the survey in light of the departure of the previous backers, KBC Bank, from the Irish market. The methodology underlying the index, which surveys a nationally representative sample of 1,000 adults, has not changed.