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| 1996 - 2009
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The overall KBC Ireland/ESRI Irish Consumer Sentiment Index was marginally lower in December 2009 at 53.3. This compares to a figure of 53.6 in November.
Commenting on the results David Duffy, ESRI, said:
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Consumer sentiment in December was modestly higher than the same month a year previously. Most of the improvement was in consumers’ expectations for both the overall economy and the labour market.
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In contrast, over the course of the year, consumers have remained pessimistic about the current and future state of their household finances”
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For the year ahead one in five consumers expect the economic situation to improve, although only one in ten anticipate an improvement in the labour market.
In addition, Austin Hughes, KBC Ireland, said:
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The broad message coming from the December survey results is that Irish consumers may sense the worst is over for the Irish economy but they don’t expect any dramatic improvement in the coming year. Although they remain cautious, they are notably less nervous than they were 12 months ago. So, consumer sentiment is telling us that 2009 ended on a weak but notably less awful note than it began.”
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The December sentiment survey was largely completed before the Budget. Pre-Budget speculation made many consumers very nervous about the possible impact of cutbacks in welfare and public sector pay on their household finances in 2010. It seems that consumers have sensed signs of a turn in the economy. However, many worry they may not share in any improvement.”
Austin Hughes added that the broad message coming from the details of the December sentiment survey is that Irish consumers sense that the worst may be over for the Irish economy. However, they feel that their household spending power is likely to weaken in 2010. The two ‘macro’ elements of the survey that address general economic prospects and the outlook for jobs both posted strong readings relative to the experience of the past year or two. This doesn’t mean that Irish consumers are particularly upbeat about the economic outlook – it remains the case that 4 out of 5 consumers expect unemployment will increase further in 2010 while 3 out of 5 think the economy will shrink further. That said, both of these readings are notably less gloomy than has been the case for some significant time. While Irish consumers aren’t unrealistically optimistic about what the economic future may hold, there are signs of an easing in the degree of pessimism about the year ahead.
Hughes said if consumers were slightly less negative about the general economic situation in December, they also became somewhat more anxious about their household finances. A number of factors may have contributed to what may seem an unlikely divergence in consumer thinking on general economic conditions and their financial health. First of all, there were signs in official inflation data that the pace of decline in consumer prices was beginning to ease. In part, this reflects the fact that the sharp declines in oil prices and interest rates seen in late 2008 were not repeated this year. More ominously, talk has turned to the possibility of higher borrowing costs as 2010 progresses and this may be beginning to be factored into calculations of future financial commitments.
"We suspect this may not have been the major influence in the weaker although assessment of household finances last month," he added.
