Consumers increasingly cautious heading into 2017

Consumer confidence fell to a near two-year low in December as political and economic uncertainty at a global level weighed on sentiment.

The KBC Bank/ESRI I consumer sentiment index slipped to 96.2 in December from 97.8 in November. The drop brought the index to its lowest level in 22 months as increased uncertainty, rather than notably weaker economic conditions, undermined confidence.

Although the monthly decline was “reasonably modest”, it was enough to push the index to its lowest level since February 2015.

"The survey suggests that from the perspective of the average Irish consumer, the past year saw the Irish economy over-promise and under-deliver in terms of improvements in living standards. It hints at a widely felt feeling of missing out from any marked gains from the strong recovery that consumers have heard or read about,"said Austin Hughes, chief economist with KBC Bank Ireland.

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Uncertainty due to the UK’s exit from the EU and Donald Trump’s election in the US appeared to weigh on consumers in December. This has led to a marked absence of a widely felt “feelgood factor” that would typically move confidence and Irish consumer spending on to an even stronger trajectory at this stage of an economic upturn.

Missing out

“As such the survey is signalling that, from a consumer perspective, the Irish economic recovery is not rooted as deeply or as broadly as had been expected,” Mr Hughes said, adding that “the predominant mood captured by the consumer sentiment survey at present is a ‘feeling of missing out’.”

The decline in Irish consumer sentiment in December was broadly based, with four of the five main elements of the index recording lower monthly readings than in November.

The exception was the jobs component of the survey, which recorded a small improvement that likely reflects the release of strong official employment data and a number of new jobs announcements.

“The majority of the components in the December sentiment index performed relatively poorly when compared to the November results,” said Daniel Foley, economist with the ESRI.

“ The combination of worsening expectations related to the state of the future economic environment and declining perceptions of current conditions make it clear that consumers still remain significantly nervous of the current and future path of the Irish economy.”