Consumer confidence falters but underlying trend upbeat - survey

Consumer confidence wavered slightly between May and June, but underlying trends remain broadly positive, according to new figures compiled by the Economic and Social Research Institute and IIB Bank.

The latest Consumer Sentiment Index recorded a value of 65.8 in June, down slightly from 66.5 in May and sharply lower than levels close to 90 reached last summer.

Detail contained within the index shows that most of the drop was linked to a feeling among consumers that the economic climate would deteriorate over the coming year.

Almost 60 per cent of consumers surveyed said they expected general economic conditions to worsen over the coming 12 months, while just 10.5 per cent predicted an improvement.

IIB chief economist Mr Austin Hughes acknowledged that consumer confidence had been dented by the absence of global economic recovery after the war in Iraq but suggested that survey respondents were not preparing for an "apocalypse".

He pointed to three-month figures that registered an increase in confidence for the third consecutive month as evidence that consumers are expecting sluggish economic growth rather than shrinkage.

Further detail from the monthly index meanwhile, showed that one-quarter of respondents thought early June was a good time to make major purchases. This marked an increase from one-fifth in May and was, according to Mr Hughes, rooted in lower interest rates and falling inflation.

He believes the coincidence of faltering sentiment about the future and stronger current spending power points to a "resilience" in the economy as a whole.

"It should be remembered that Irish consumer sentiment began to weaken from May of 2000. Irish consumers anticipated the boom well before many economists, so households haven't been forced into a belated recent adjustment of spending patterns," Mr Hughes said.