Consumer confidence rises to a 10-year high

Consumer confidence in Ireland rose to a ten-year high in November on the back of a boost from Budget 2016 and a recovery in the jobs market.

In November, the KBC Ireland/ESRI Consumer Sentiment Index rose to 103.1 from 101.3 in October. This is the highest level seen since before the crisis, and is the strongest measure since January 2006 when it stood at 106.2. The three-month moving average also increased in November month from 101.0 in October to 101.7.

Daniel Foley of the ESRI, said that the strongest development in November related to consumer's perception of future employment prospects.

“There was a significant increase in this component which contributed to an overall increase in the index of consumer expectations. This is the first increase seen in the jobs element of the survey since June 2015,” he said,

Austin Hughes, chief economist with KBC Bank Ireland, said the results suggest that the recovery is "strengthening and spreading to the point where most consumers now sense it will make a difference to their financial circumstances".

He does caution however that the figures don’t suggest “a return to the boom”, pointing to a “slightly weaker buying climate”, which hints at continuing financial pressures facing many households.

Although the November increase was not large, it was broadly based, with four of the five components of the sentiment survey stronger than in October. Of these, the most notable aspect was the improvement in sentiment towards jobs, which reported its strongest monthly gain since July 2014.

A notable feature of the November survey was a clear improvement in both elements that relate to household finances.

“Our sense is that Budget 2016 contributed significantly to this,” Mr Hughes said.

While the report also shows that a slightly larger number of consumers (28%) feel their household finances worsened in the past year than experienced an improvement (24%), but this was the healthiest result for this component of the survey since May 2007.

“We reckon that on-going weakness in oil prices, generally subdued inflation, rising property prices and some improvement in earnings prospects could all have contributed to this result,” Mr Hughes said.

The only element of the survey that weakened between October and November was the buying climate which recorded its weakest reading since November 2014. According to Mr Hughes, this may reflect particular seasonal influences that relate to the anticipation of increased outlays over Christmas and a correspondingly more cautious attitude to spending in November.