Consumer sentiment falls as consumers fail to really feel recovery

Latest KBC Bank/ESRI consumer sentiment index shows decline in month of February

Shoppers off  Grafton Street: households remain cautious about Ireland’s economic prospects and their own finances. Photograph: Eric Luke

Shoppers off Grafton Street: households remain cautious about Ireland’s economic prospects and their own finances. Photograph: Eric Luke

 

Consumer sentiment drifted lower in February, albeit from a 17-year high the previous month, as households remained cautious about Ireland’s economic prospects and their own finances.

The latest KBC Bank/Economic and Social Research Institute consumer sentiment index fell to 105.2 in February down from a record 110.4 in January.

KBC’s chief economist Austin Hughes noted the exceptional January report was always likely to lead to some correction in the February data.

He also said that while very few consumers see conditions worsening, not many were reporting material gain.

The latest monitor found just one in four consumers saw their personal finances improving in the coming year.

This comes amid a pick-up in wage growth with separate figures from the Central Statistics Office (CSO) last week showing average earnings grew by 2.5 per cent last year, the sharpest rate of growth since the crash.

Modest income gains and expectations suggest the economy was still some way from overheating, Mr Hughes said.

‘Big chill’

“The ‘big chill’ of the financial crisis may be well behind us but the economic ‘thaw’ has been slow and uneven,” he said. “The survey details continue to point towards a gradual return to more normal conditions, but the pullback in consumer sentiment in February suggests this may yet take some time,” Mr Hughes added.

The consumer sentiment reading here tallies with surveys in the euro zone and the UK. In contrast, US consumer sentiment for February saw a larger-than-anticipated rebound from a disappointing January number.

“It might have been expected that a significant sell-off in global equity markets would have weighed more heavily on US consumers given the relative importance of stocks in US wealth portfolios,” Mr Hughes said in his analysis. “This would imply that equity market weakness was not a key driver of poor sentiment on this side of the Atlantic but it could also be the case that less-established recoveries mean European consumers remain more sensitive to any threat of a return to recent difficulties.

“Both elements of the Irish consumer sentiment survey that relate to general economic conditions showed moderate declines from strong January readings.

“The turmoil in global stock markets might have played some part but if this were the dominant influence it might have been expected that the pullback in views on economic growth would have been greater than that in regard to jobs.”