Irish consumer confidence posted a sharp increase in January to climb to its best level in two years, according to a new report from the Irish League of Credit Unions.
The Credit Union Irish Consumer Sentiment Survey is a monthly survey of a nationally-representative sample of 1,000 adults. Its latest edition was conducted from January 4th to January 19th.
It found the mood of Irish consumers improved markedly in January as falling energy prices and announcements of grocery price cuts suggested 2024 could see some reversal of the cost-of-living pressures of the past couple of years.
“In addition tax data and recent forecasts pointed to a resilient Irish economy, while a lengthy Christmas break during the survey period likely prompted a seasonal switch-off from economic concerns,” said economist Austin Hughes in his analysis of the data.
He pointed out the “still challenging” economic and financial backdrop, and said it “would not be surprising to see some pull-back in sentiment in coming months as a difficult global outlook comes into focus and Christmas spending bills bite”.
The consumer sentiment survey rose sharply in January, signalling a major uplift in consumer thinking as well as reinforcing the trend improvement in Irish consumer confidence suggested by successive gains through each of the previous three months.
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Sentiment increased to 74.2 in January from 62.4 in December. This unusually large 11.2 point monthly gain was the strongest since November 2020 when hopes of a Covid-free Christmas sparked a 12.9 point increase.
The January sentiment reading put Irish consumer confidence at its highest level in almost two years when Russia’s invasion of Ukraine dramatically darkened the global outlook.
“Although we would emphasise the encouraging nature of the pick-up in the latest reading of Irish consumer confidence, we should also point out that at 72.4 it remains some distance below the now 29-year history of the sentiment survey,” said Mr Hughes.
Breaking down the data Mr Hughes said a more constrained improvement in thinking on the general economic environment likely reflects ongoing concerns about the global economic outlook as well as elevated uncertainty about Ireland’s multinational sector.
[ Consumer sentiment boosted by supports in Budget 2024Opens in new window ]
“The comparatively modest improvement in the buying climate suggests that most consumers will need altogether clearer evidence of a marked improvement in their spending power before they contemplate a sharp step-up in their spending plans,” he said. “As such the evidence appears consistent with a gradual build-up in household spending power through 2024 rather than an early-year surge.”
The report also shows Irish consumers are much more strongly of the view that house prices here will continue to grow over the next five years. Nearly five times as many consumers think house prices will be higher than think they will fall (68 per cent versus 14 per cent).
[ Irish consumer sentiment dips on negative jobs data and weakening global outlookOpens in new window ]
The 2024 survey thinking on house prices is similar to that of 2022 and notably different from the 2023 results.
“With household incomes expected to improve and recent developments suggesting that cost-of-living pressures and borrowing costs may be less threatening in the medium-term than seemed likely a year ago, affordability difficulties may be less acute,” said Mr Hughes.
“While these considerations might suggest continued strong demand for housing, consumers may also take the view that marked increases in supply may not be forthcoming notwithstanding the substantial improvement in housing completions in recent years.”
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