Irish consumer sentiment weakened in February. The overall Consumer Sentiment Index stood at 59.4 in February, compared to a figure of 64.6 in January. The corresponding figure for February 2009 was 44.2. The 3-month moving average rose to 59.1 compared to the 57.2 recorded in January. The 3-month moving average stood at 48.0 in February 2009. 

The Consumer Sentiment Index comprises two sub-indices; an index of consumer expectation that focuses on how consumers view prospects over the next 12 months and an index of current economic conditions, focusing on the present situation. The Index of Consumers Expectations is based on consumers’ perceptions of their future financial situation, the economic outlook and employment expectations. The index value for February stood at 46.3 compared with 49.0 in January.

Consumers’ perception of their current situation weakened in February, primarily due to a more negative perception of the buying climate. The value for this particular index was 78.8, compared with 87.7 in January.  The three month average of the sentiment series rose to 59.1 last month from 57.2 in January.  More significantly, 4 out of the 5 main elements of the survey held on to most of the gains they made in January.  The exception was consumers’ assessment of the buying climate.  This posted a sharp and largely expected decline following the end of the post-Christmas sales and, in many instances, the arrival of bills related to Christmas and New Year spending.  The decline in this element was responsible for about three quarters of the drop in the Consumer Sentiment Index in February.

Commenting on the results David Duffy, ESRI, said: 

• “The results for consumer sentiment indicate a weakening in February, following an improvement in January.”

• “Some weakening of consumer sentiment was anticipated at the time of the improvement in January. In the past consumers have become more positive about purchasing major household items every January, reflecting, at least in part, the winter sales, followed by a more subdued figure in February. This pattern has continued, contributing to the moderation in consumer sentiment.”

• “Although the decline in sentiment reflects in part a post-sales effect, it is noticeable that the decline is also driven by consumers becoming more negative in their perception of the outlook for the labour market and the economy.

 In addition, Austin Hughes, KBC Ireland, noted: 

• “The surprise in the February survey is that consumer sentiment seems to have held up reasonably well.  A poorer buying climate was responsible for about three quarters of the drop in the Index last month.  It was inevitable that consumers spending intentions would weaken once the sales ended and bills related to Christmas spending began to arrive.  However, the buying climate was still stronger in February than in the latter stages of 2009.  So, the sharp decline in Irish consumer spending may be coming to an end although the survey doesn’t point towards any prospect of a dramatic rebound anytime soon.”

• “The February consumer sentiment reading at 59.4 is still well below the 14 year survey average of 91.8.  So, Irish consumers are still fairly downbeat about the broad economic outlook and their personal finances.  However, the underlying trend seems to be improving marginally.  The February results suggest consumers expect conditions will remain tough in 2010 but not quite as terrible as they were in 2009.  It is very obvious that consumers do not expect the Irish economy to be strong or to recover in a straight line but the message from the February report implies they still expect economic conditions to get better rather than worse in the coming year.”

Hughes added that the February consumer sentiment results are encouraging in that they suggest the underlying trend in sentiment is still improving, albeit modestly.  He says it remains the case that consumers are still fairly gloomy on the outlook for the Irish economy and jobs and only marginally more positive in relation to their personal situation.  So, while sentiment may have improved of late there is no sense of ‘irrational exuberance’ in these numbers.  Instead, it seems Irish consumers expect a year of unsteady progress at best.  This realism may be useful in helping them get through what is likely to be a tough 2010 for the Irish economy.  Arguably, it leaves them a little better placed than some of their counterparts in many other countries who are rapidly revising more optimistic expectations downwards.

The data was obtained from telephone interviews during the first two weeks of the month with around 800 completed questionnaires. The data were re-weighted in line with gender, age and level of educational attainment to ensure the data is fully representative of the national population of adults.