Big bounce for consumer sentiment in June

Everything from Brexit, Varadkar and the weather could have had an impact

Big bounce for consumer sentiment in June

Shoppers on Grafton Street in Dublin in 2004 | Image: RollingNews.ie

New figures show Irish consumers are more optimistic about the economy.

The KBC Bank-ESRI index shows consumer sentiment in June was at its strongest level since February 2016.

It says the current level reflects "a solidly improving" Irish economy.

But it also notes that in the absence of "dramatically positive news" on the economy, there is "a significant chance" of at least a partial reversal of the gain in the months ahead.

"The monthly increase may reflect a sequence of positive reports on the Irish economy and a sense that the outcome of the recent UK election may lessen the threat of a ‘hard Brexit’.

"There may also have been some positive impact from extremely low inflation and the start of summer sales as well as the conclusion to public sector pay talks."

The KBC Bank/ESRI consumer sentiment index rose to 105.0 in June from 100.5 in May.

The index says the increase is likely reflected domestic issues, as there were contrasting developments in similar indicators elsewhere.

UK and Eurozone

"Some increased uncertainty of late about the US economy and the continuing sluggishness of wage growth in spite of rising employment may be weighing on consumers and contributing to a modest drop in sentiment in June.

"UK consumer confidence saw a comparatively sharp decline that brought that index to its lowest level since last July as higher inflation has begun to squeeze living standards while the recent election result created doubts (and signalled serious divisions) about outlook for the British economy."

It adds: "In marked contrast, Eurozone consumer confidence recorded its strongest reading since April 2001 as a range of better than expected indicators of economic activity may be encouraging consumers in the single currency zone to the view that a long overdue improvement in their prospects might be approaching."

Austin Hughes, chief economist at KBC Bank Ireland, says: "The increase in Irish consumer sentiment in June was notable in that all five main elements of the survey posted monthly increases for the first time since January.

"This might suggest something of a mood shift but we would caution that the January gains were largely reversed in subsequent months.

"It could be that the June ‘bounce’ owes something to a reassessment of Irish economic and financial conditions as a new Taoiseach prepared to take office at the end of the survey period but we think variations in the scale of improvement in the different components of the survey hint that other specific factors played important roles.

"Equally, the exceptional weather in late June came too late to have any impact on the survey results."

"The most notable improvement in the June sentiment reading was seen in relation to the general outlook for the Irish economy over the coming 12 months."