Dublin-based consumers have become “notably more concerned” about the economic outlook than their counterparts in rural areas, according to new figures.
The latest KBC Bank Ireland/ESRI Consumer Sentiment Index shows a broadly based and similarly scaled increase in confidence across the State in the first quarter of 2017. This largely reflects an improvement in household finances.
In the case of Dublin consumers, the recovery in sentiment in early 2017 reversed only about half of the sharp deterioration seen in the previous quarter. Outside the capital, recent gains put consumer confidence close to the highs that were seen in late 2015.
KBC Ireland chief economist Austin Hughes said that in both instances, the latest reading suggested a "broadly positive outlook prevails at present", and implied some easing in the worries that marked the late-2016 results.
“The most recent reading suggests Dublin consumers remain notably more cautious than consumers in the rest of the country,” he said. “We think this reflects a greater sensitivity to external risks to the Irish economic outlook on the part of consumers in the capital.”
On the index itself, consumer sentiment in Dublin is down from 159.8 during the first quarter of 2016 to 143.5 this year, although it should be noted that last year’s rating was a season high. This also compares with 137.8 during the fourth quarter of 2016.
Outside the capital, consumer sentiment was at 158.4 compared with 160.5 for the same period last year. During the fourth quarter of 2016, the rating was 151.5.
The main driver of better consumer sentiment both in Dublin and elsewhere was a less nervous view of household finances. This was due to healthier readings both in relation to the past 12 months and the outlook for the next 12 months.
“Fears of a sharp worsening in household financial conditions that particularly concerned Dublin consumers in late 2016 have not materialised, prompting a relief rally in this element of the survey,” said Mr Hughes.
“The improvement in consumers’ perceptions of their personal financial circumstances was primarily driven by a drop in the proportion of consumers reporting deteriorating conditions rather than any marked increase in numbers indicating gains in their spending power.
“While this implies some easing in ‘feel-bad’, it is unlikely to prompt the emergence of any pronounced ‘feel-good’ factor that would spark notably stronger levels of spending, although the survey suggests some modest recovery in spending plans.”
Brexit and Trump
Mr Hughes said worries in relation to Brexit and US president Donald Trump’s plan to cut US corporation tax to 15 per cent would adversely affect confidence.
“Worries about a potentially substantial adverse impact from Brexit as well as possible changes in US economic and tax policy may be a particular concern because of the importance of trade and multinational activities to the capital,” he said.
“While consumers in other parts of the country are clearly aware of such risks, the direct implications may be less threatening and, in many instances, signs of a broadening of the recovery in domestic spending of late may have an offsetting impact on their assessment of the economic outlook.”
