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News : Irish Economy Last Updated: Feb 5, 2014 - 7:30 AM


Irish Economy 2014: Consumer Sentiment Index back to 2007 levels
By Finfacts Team
Feb 5, 2014 - 12:27 AM

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The overall KBC Ireland/ESRI Consumer Sentiment Index increased to 84.6 in January, from 79.8 in December and 64.2 in January 2013. The 3-month moving average increased from 75.7 last month to 78.5 in January. The index is back to May 2007 levels.

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 Consumer 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 improved to 75.8 this month, from 72.7 in December; 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 97.6 from 90.3 in December.

Each of the Consumer Sentiment Index, the Index of Consumer Expectations and the Index of Current Economic Conditions have now improved to a peak not seen since May 2007.

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 Kevin Timoney, ESRI, said: “Consumer Sentiment gained further in January, following an upbeat December. The index improved from 79.8 last month to 84.6, a level not seen since May 2007. The 3-month moving average increased further to 78.5, from 75.7 in December.

"Every year of the survey has begun with a boost to the buying climate for durable consumer goods, supported by the January sales. This month saw the component improve to a four-year peak. Improved perceptions for the labour market over the coming year also contributed to the increase in sentiment. However, household perceptions of their current financial situation worsened somewhat compared to December.

“The index of consumer expectations improved from 72.7 in December to 75.8 this month. The index of current economic conditions jumped from 90.3 to 97.6.”

In addition, Austin Hughes, KBC Bank Ireland, noted: “Irish consumers began 2014 in a more positive mood as it seems they expect the Irish economy to improve and unemployment to fall further in the coming year. The sentiment index is now in line with its long term average for a survey that stretches back eighteen years. We don’t think this means consumers see current conditions as ‘normal’. The circumstances facing Irish consumers have varied so much through this period that we can’t interpret the January reading in this way. However, last month’s results suggest consumers sense that some improvement from the difficulties of the past few years is taking hold.

“About 70% of the rise in the sentiment index between December and January is due to a largely seasonal boost to spending plans that reflects the influence of Christmas sales. There is likely to be some reversal of this factor in the February data that might even mean a weaker reading overall this month. However, we think the underlying trend in consumer sentiment is still modestly positive and any setback is likely to be temporary.”

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