Consumer confidence up in July, but decline in August predicted

Consumer confidence picked up slightly in July following three months of declines amid a string of positive economic reports, though economists warned consumer sentiment will take a hit in August because of higher interest rates and energy costs.

The IIB/ESRI Consumer Sentiment Index rose a notch to 90.9 last month from a reading of 89.4 in June, in the index's first monthly gain since April.

Confidence improved as a result of strong economic growth figures and studies that suggested Irish people were among the wealthiest in the world, according to IIB Bank.

However, another downturn in sentiment could be on the cards this month following the announcement of sharp increases in electricity and gas bills, the recent spike in oil prices, and the European Central Bank's fourth interest-rate hike in nine months.

"There is a risk that consumer sentiment could take quite a tumble in August," said Austin Hughes, an economist at IIB. "Rising interest rates and higher energy costs, together with the prospect of more bad news on both these fronts later in the year, will be quite a blow to confidence."

Indeed, the three-month moving average, which illustrates the underlying trend in consumer confidence, dropped to 90.8 in July from the 93.5 recorded in June and the 97.8 posted a year earlier.

The July report showed that consumer optimism about both personal finances and the general economy for the coming year more than offset consumers' weakening assessment of their current situation. However, consumers were more cautious about their employment prospects amid news of rising redundancy figures.

The expectations index, which measures consumers' perceptions of their future financial situation, the economic outlook and employment expectations, rose to 80.9 in July from 77.9 the previous month.

Maturing SSIAs, further price cuts in summer sales, and expectations of a generous budget also drove the "modest" improvement in consumer sentiment last month, IIB said.