Irish Economy 2014:
The overall KBC Ireland/ESRI Consumer Sentiment Index decreased to 79.4 in May,
from 87.2 in April but up from 61.2 in May last year. The 3-month moving average
fell slightly to 83.2 in May from 85.3 in April.
Commenting on the results David Byrne, ESRI,
said: "Consumer Sentiment dropped
in May, reflecting a dis-improvement in perceptions of the current economic
environment and of the outlook for the next year.”
The index of current economic conditions fell to 90.6, from 97.0 last month.
Households more negative about the current buying climate and about their
financial situation compared with 12 months ago. The index of consumer
expectations also fell; to 71.8 from 80.6 in April. This was mainly driven by a
more negative perception of future household finances amongst consumers.
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
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 fell to 71.8 this month, from 80.6
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 fell to 90.6 from 97.0 in March.
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 favourable
replies minus the percent giving unfavourable 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.
Austin Hughes, KBC Bank Ireland, added: “It is not particularly surprising that
consumer sentiment weakened in May. The turnaround in the Irish economy is very
uneven and many households remain under pressure. So we can’t expect a straight
line improvement in confidence. That said, the scale of the drop in the
sentiment index in May is much greater than might have been anticipated. It will
probably require analysis of the next couple of months’ data to determine if
this was an aberration or points to much poorer sentiment and some downside
risks to consumer spending.
The size of the drop in sentiment last month is difficult to explain. It may owe
something to a tendency for data series to throw up extreme outliers from time
to time that reflects statistical ‘noise’ rather than a fundamental change in
economic circumstances. This could have played some role in the May reading but
we also think the election campaign and concerns about water charges and medical
cards may have caused consumers to take a gloomier view. Through the survey
period there was an intense focus on financial and economic strains that had
been evident, albeit to a lesser degree, in previous surveys. Our sense is that
this debate amplified consumer worries and prompted a sharp drop in confidence."