Consumer sentiment jumps to highest level in 12 months amid vaccine hopes

KBC Bank’s latest survey suggests consumers are more hopeful

People relaxing in St Stephen’s Green in Dublin this week. Consumer sentiment has risen this month. Photograph: Dara Mac Donaill

People relaxing in St Stephen’s Green in Dublin this week. Consumer sentiment has risen this month. Photograph: Dara Mac Donaill

 

Irish consumer sentiment has risen to its highest level in 12 months amid hopes that the vaccine rollout will soon normalise economic conditions.

The latest KBC Bank Ireland consumer sentiment index rose to 77.1 in March from 70.8 in February.

This was the second month-on-month gain, and reverses the sharp decline seen in January which coincided with a big upsurge in Covid cases.

“Increased consumer confidence in March was driven by a further easing in concerns about the outlook for the Irish economy and jobs likely prompted by positive economic data and the promise of increased vaccinations,” said KBC Bank Ireland economist Austin Hughes.

“However, consumers remain cautious about their own financial circumstances, and are correspondingly careful in their spending plans.

“The strongest monthly improvements in the March report were seen in the forward-looking elements of the survey dominated by the 12-month outlook for Irish economic activity and jobs,” Mr Hughes said.

As part of the latest survey KBC asked consumers about their savings plans. More than a third of consumers (35 per cent) said they had not built up any additional deposits, with this share rising notably for lower income and financially-strained consumers.

“These responses underscore the uneven nature of pandemic impacts across Irish households and the broader Irish economy,” the report said.

Emergencies

Some 22 per cent of households said they would set aside these additional savings for emergencies, while a further 9 per cent would put them towards a particular future outlay such as home purchase or renovation or education.

Irish households placed an additional €15 billion on deposit last year.

“The scale of that acceleration likely reflects both fear and forced savings as increased uncertainty bred caution and health-related restrictions curbed spending options,” Mr Hughes said.

“As the overall drop in Irish consumer spending in 2020 was €9 billion, how much of that increased €8 billion of household deposits is spent in 2021 will play a key role in determining whether the expected rebound in spending amounts to a bounce or a boom.”