Ireland’s consumer confidence has dropped to its weakest level in thirteen years, according to the KBC Bank Ireland/ESRI Consumer Sentiment Index.
The Consumer Sentiment Index (CSI) fell to 102.1 points in June 2018 after it rose to 106.7 in May, which is reportedly the second largest monthly decline in the past twenty months.
The pull-back in confidence is a reflection of the growing global risks and a lack of a domestic ‘feel-good' factor as opposed to poorer conditions, the survey reports.
Cautious, Not Defeated
Austin Hughes, chief economist, KBC Bank Ireland, compiled the survey, and he said that the outlook is more ‘guardedly positive’ and cautious rather than down in confidence.
“While this clearly points towards weakening confidence, we don’t think it suggests the average Irish consumer has experienced any dramatic worsening in their economic circumstances of late,” Hughes said.
“Instead, the poorer sentiment reading for June likely emphasises how fragile confidence and the financial circumstances of many Irish consumers remain even after several years of strong recovery in activity and employment in the Irish economy.”
Hughes highlighted the current trade tariffs in the US and uncertainty surrounding Brexit as major players in Irish consumer sentiment on top of domestic worries.
He also noted that the Euro Area’s consumer confidence also fell to an eight-month low in June, with fifteen of the eighteen countries, excluding Ireland, reporting monthly declines.
While Irish consumers have continued to report some measure of progress in their personal financial circumstances, the survey emphasises how modest and uneven this is. Only one in four consumers think that their financial situation has improved in the past twelve months and a similar number expect gains in the coming twelve months.
The sharpest pull-back in the June sentiment survey related to the buying climate, probably the most volatile element of the survey, however, the survey said it expects some recovery in July as consumers hunt for bargains in the summer sales.
The ‘choppy’ nature of monthly changes, both in this element of the survey and in retail sales data, suggests Irish consumers are driven by discounts rather than ‘splashing the cash’.
The survey said that the June sentiment reading is still consistent with a healthy increase in Irish consumer spending.
“From the perspective of the average Irish consumer, the economic climate is still one of relatively cool conditions rather than soaring temperatures at present,” Hughes said.
“The fall in consumer confidence in June coincides with a reversal of sentiment across the Euro Area. The fall in June was driven by a pullback in both households’ views on the economic situation as well as their expectations for the future,” said Philip Economides of ESRI.
“Given the increased geopolitical tensions between Ireland’s largest trade partners and a rapidly approaching Brexit deadline, it appears rather than any specific economic friction, it is likely an accumulating sense of uncertainty has undermined confidence.”
© 2018 Checkout – your source for the latest Irish retail news. Article by Aidan O’Sullivan. Click subscribe to sign up for the Checkout print edition.