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Irish Economy 2012: The overall KBC Bank Ireland/ESRI Consumer Sentiment Index increased to 62.3 in
June from 61.0 in May. The Index for June 2011 was 56.3. The 3-month moving
average rose to 61.9 in June from 61.4 in May.
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 consumers’ present situation.
The Index of Consumers Expectations is
based on consumers’ perceptions of their future financial situation, their
economic outlook for the country as a whole and employment expectations. This
sub-index decreased from 50.6 in May to 49.5 in June.
The Index of Current
Economic Conditions is based on how consumers feel about their current financial
circumstance compared to 12 months ago, as well as their perception of the
current buying environment for large household purchases. The Index of Current
Economic Conditions increased to 81.4 in June from 76.4 in May.
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 Eddie Casey, ESRI, said:
“The latest Consumer Sentiment index reveals a slight increase in June, with
most of the previous month’s decline having been reversed. Despite some
recent hesitation, the broader trend reveals a gradual recovery in sentiment
since the end of last year.
“In June, an increase in the current economic conditions sub-index more than
offset a modest decline in the forward-looking sub-index. Overall, the
improvement in sentiment appears to have reflected less negative perceptions
of the current environment, with consumers reporting a slight improvement in
the buying climate and their financial situations.
“Consumers remain concerned that the economic outlook remains fragile,
however, with a downward revision to the expectations for employment and the
general economic environment weighing on the increase in sentiment in June.
index of current economic conditions rose to 81.4 in June from 76.4 in May,
while the index of consumer expectations fell to 49.5 in June from 50.6 in
the previous month.”
addition, Austin Hughes, KBC Bank Ireland, noted:
“The fact that the rise in sentiment in June largely offset the decline in
May emphasises the patchy nature of the improvement in the mood of Irish
consumers through the first half of 2012. In view of the difficult and
uncertain economic backdrop facing Irish consumers, this sort of jagged
pattern about a modestly improving trend is probably as much as can be
expected. If sentiment continues to improve modestly through the remainder
of 2012, this would seem consistent with a gradual stabilisation in consumer
“The June results show a divergence between the greater concern expressed
about the broad economic outlook and a little less pessimism in relation to
households’ own financial situations. This may reflect a ‘silver lining’ in
terms of lower oil prices and a possible drop in borrowing costs that
accompanied darker Euro zone clouds. It should also be noted that the
improvement in sentiment in June largely reflects a drop in negative
responses rather than any marked increase in positive replies. So, there is
no sense Irish consumers expect any dramatic improvement in their
circumstances that would prompt much stronger spending.”
Hughes added: "The slight rise in Irish consumer
sentiment in June was at odds with a deterioration in similar indicators for the
US and the Eurozone. The comparable US indicator, compiled by the University of
Michigan, dropped to its lowest level since December. However, this was the
first decline reported in the past ten months during which time the Index
climbed to a five year high. So, the factors influencing the mood of the US
consumer of late appear somewhat different to those weighing on their Irish
The Euro area confidence gauge weakened somewhat in June. Uncertainty over the
future of the single currency area combined with the near certainty of further
budget austerity implies poorer prospects for European consumers. So, their mood
has remained relatively downbeat through the first six months of this year.
Compared to results for the Euro area, the slight improvement in Irish Consumer
Sentiment in June is encouraging and probably reflects different judgements on
the part of consumers in Ireland and elsewhere on the implications of the
broadening of the Euro area crisis in the past year or so."
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