Consumers lost confidence ahead of election

Consumer sentiment weakened modestly in February, on the back of a drop in outlook for household finances despite some pre-election campaigns which promised that the recovery would continue.

The KBC Bank Ireland/ESRI consumer sentiment index declined to 105.8 in February from 108.6 in January, reversing a little over half the gains of the previous month that had prompted the strongest reading in 15 years. However Daniel Foley of the ESRI said that the underlying trend of the index is that confidence is still “broadly positive”.

While seasonal factors may have a part to play in February's softening, as consumers scale back after splurging over the Christmas period, Austin Hughes, chief economist with KBC Bank Ireland, attributes the decline to lower expectations as to how much the recovery will translate into stronger financial circumstances for the average Irish consumer.

Indeed one of the weakest elements of the survey in February was in relation to consumers’ outlook for their personal finances.

The slight drop may also reflect increased uncertainty both in terms of international and domestic prospects.

“Similar confidence readings weakened in the US and fell sharply in the euro area last month. Consumers around the world continue to be disappointed by the absence of economic conditions and policies that are robust enough to deliver clear and broadly felt improvements in their living standards,” Mr Hughes said.