Spike in consumer sentiment comes with weather warning
Economist says lift in public mood linked to period of exceptionally good weather
Irish consumer sentiment rose to its highest level for almost six years in June as the property and jobs markets showed signs of improvement.
The KBC Bank/ESRI Consumer Sentiment Index came with a warning, however, with one economist saying the public mood may have been overinflated as the survey was taken during a period of exceptionally good weather.
The Index rose from a reading of 61.2 in May to 70.6 in June. The average reading of the index in the first six months of the year was 62.4.
“It remains the case that Irish consumers are cautious and the improvement in sentiment is still fragile but the June sentiment reading is consistent with the view that the Irish economy is edging forward rather than slipping backward,” KBC economist Austin Hughes said.
Mr Hughes said the June figures “may have been boosted by exceptionally good weather” during the survey period.
“In principle, this shouldn’t happen because the survey only asks specific questions about the economy and household finances,” he continued. “We did some basic statistical analysis that suggests consumer sentiment isn’t usually influenced by the Irish weather- we should be used to it but in periods of exceptional sunshine, confidence tends to be a little bit higher.”
Mr Hughes said the sense that consumer mood was open to influence by exceptional weather and not the norm was given credence by the “failure to find any statistically significant link between Irish consumer sentiment and rainfall”.
The survey is based on 800 completed questionnaires completed during telephone interviews during the first two weeks of the month. The data obtained were re-weighted with respect to gender, age and education so as to ensure it represents the national adult population.
The consumer expectations sub-index, which examines people’s present circumstances and their expectations for the coming year, increased sharply from 51.3 in May to 61.7 in June.
The current economic conditions sub-index - based on how consumers feel about their current financial situation versus a year ago and their perception of the housing market - rose by 7.7 to 83.7 in June.
“The increase follows a period of several months with little change in the index. However, in the past a sudden rise in sentiment has not always been maintained – this has been especially true of recent years,” ESRI researcher Kevin Timoney said.” As such, some reduction relative to the June reading may occur next month.”