Consumer sentiment continues to rise in October

Irish consumer sentiment continued to improve last month following a six-year high in September, as a brighter economic outlook boosted consumers’ willingness to spend.

The KBC Bank Ireland/ESRI consumer sentiment index rose to 76.2 in October from 73.1 in September, reaching the highest level since June 2007.

"The survey hints at an emerging view that the Irish economy is now clearly past the worst even if there is little expectation that dramatically stronger conditions are set to take hold," KBC economist Austin Hughes said.

“Spending power is still under pressure but signs of improvement in the jobs and property markets may be making consumers a little more willing to spend.”

There is still volatility in consumer sentiment however, with six monthly increases and four monthly declines in the index so far this year, suggesting consumers are still having difficulty making sense of an uncertain economic landscape, according to KBC.

As all but 32 of the 806 survey interviews were carried out before the budget, the impact of cuts on consumer sentiment will only be known when the November survey is compiled.

All components of the survey improved in October with the exception of future household finances, which showed a modest decline.

Mr Hughes said the October reading hinted that consumers were worried household spending power would be hit by the budget, but this concern wasn’t as strong as it had been in previous years.

“Consumers now see budget pain as the norm. However, they also knew that the adjustment would be towards the lower end of the previously signalled range while changes to income taxes and the main benefit rates were ruled out in advance.”

The results suggest a majority of consumers don’t expect the Irish economy to improve in the next 12 months, but there were some positive indicators that sentiment on the economic outlook is improving.

Just 28 per cent of those surveyed responded with negative views about the economy, the lowest level since February 2006. Those responding positively rose slightly to 39 per cent, the highest proportion of positive views since August 2000.

The rise in Irish consumer sentiment in October was stronger than the marginal improvement reported in euro zone confidence data.

Comparable US consumer sentiment indexes showed a marked weakening in the month, attributable to concerns over the consequences of the Federal government shut-down and difficulties in resolving debt ceiling issues.

This implies that domestic rather than global developments prompted the rise in Irish consumer sentiment this month, according to KBC.

There was also a fractional improvement in sentiment towards the jobs market, attributable to a host of new jobs announcements and a further decline in Live Register numbers in September and October.

The authors of the report say the most surprising element of the October results was the significant improvement in buying climate, which may have been influenced by exceptionally low inflation and special consumer offers.