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News : Irish Economy Last Updated: Mar 9, 2011 - 5:47 AM

Irish consumer confidence rose in February
By Finfacts Team
Mar 8, 2011 - 12:50 PM

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The overall KBC Ireland/ESRI Irish Consumer Sentiment Index rose in February to 50.3. This compares to a figure of 48.7 in January, and a value of 59.4 in February 2010. The February confidence reading remains above the all time low of 39.6 in July 2008 but it is still considerably lower than the all time high of 130.9 in January 2000.

 The overall Consumer Sentiment Index stood at 50.3 in February, compared to a figure of 48.7 in January. The corresponding figure for February 2010 was 59.4. The 3-month moving average rose to 47.8 compared to the 47.1 recorded in January. The 3-month moving average stood at 59.1 in February 2010. 

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 37.8, up from 31.5 in January.

Consumers’ perception of their current situation weakened in February. The value for this particular index was 68.9 in February, compared with 74.2 in January. This is primarily due to a negative perception by consumers of the current buying climate and their current household finances.

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. Each index is calculated by computing the relative scores (the percent giving favorable replies minus the percent giving unfavorable replies (the balance), plus 100) for each question used in the different indices. Those who reply “Don’t Know”, “Remain the same” are excluded from the index calculations. Each relative score is rounded to the nearest whole number. The sum of the relative scores is then divided by the base period total for each index.

Commenting on the results David Duffy, ESRI, said: “Consumer sentiment improved in February, due to an improvement in the forward looking expectations index which rose to 37.8 in February, from 31.5 in January. In contrast, the index of current economic conditions weakened to 68.9 in February from 74.2 in January.

 “Although sentiment has improved, the underlying figures suggest that any recovery in confidence remains tentative. Part of the improvement in sentiment is due to a move from a negative to a neutral outlook by respondents, suggesting a cautious outlook by consumers. The underlying message from the analysis is that consumers remain cautious in the present circumstances.”  

In addition, Austin Hughes, KBC Ireland, noted: “The slight rise in consumer sentiment in February is surprising in the light of a lot of bad news during the survey period. The run-up to the election focussed heavily on Ireland’s economic problems and we also saw downward revisions to growth forecasts as well as further increases in energy and food prices.  In these circumstances, the marginal increase in sentiment hints that Irish consumers have prepared themselves for a lot of bad news.  They may also have responded to evidence of stronger global growth as well as tentative signs of improvement in a variety of domestic economic indicators.

 “It should be emphasised that even after the slight improvement seen in February, current sentiment readings are far below the long term norm.  So, it is clear that Irish consumers are fairly gloomy at present and, of course, they face further problems.  In particular, looming ECB interest rate increases could take a further toll on confidence in the months ahead.  That said, February survey results hint at some resilience in sentiment which might suggest spending may not be quite as weak as feared.“

Austin Hughes additionally commented: "As might be expected, the details of the Irish consumer sentiment data for February were mixed with three of the five main elements improving relative to January and the other two declining.  The most negative reading related to the buying climate which, as expected, worsened following the end of post-Christmas sales and the arrival of post-Christmas bills.

 There is little question that the current spending habits of Irish consumers are very restrained and the February reading points towards the persistence of subdued spending patterns through 2011.  However, the scale of pull-back in February was, like the seasonal increase that preceeded it in January, relatively modest compared to the experience of previous years.  So, there is little in these data that threatens a marked reduction in consumer spending intentions in the coming year."

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