Consumers still ‘overwhelmingly gloomy’ in September

Irish people ‘struggling to make sense’ of economic picture, finds KBC Bank Ireland

A near-empty Grafton Street in Dublin in April. A modest rise in consumer spending plans in September may have been helped by discounting and the drop in VAT. Photograph: Dara Mac Dónaill

A near-empty Grafton Street in Dublin in April. A modest rise in consumer spending plans in September may have been helped by discounting and the drop in VAT. Photograph: Dara Mac Dónaill

 

The mood among consumers remained “overwhelmingly gloomy” in September even though it was better than in August, the latest edition of the KBC Bank Ireland consumer sentiment index suggests.

Irish consumer confidence managed a small bounce this month, though the survey of 1,000 adults by Core Research took place before the introduction of localised restrictions to curb the spread of Covid-19 in Dublin and later Donegal.

“The slight gain in September is encouraging, but the zig-zag pattern of recent months hints at an Irish consumer struggling to make sense of the very unclear environment at present,” said KBC Bank Ireland chief economist Austin Hughes.

“More worryingly, the sentiment index remains at levels that suggest consumers remain worried about both the general economic outlook and their own household finances.”

The index increased to a reading of 60.7 this month, a 1.8 percentage point gain on August and well above the April low of 42.6. However, in February, before the coronavirus crisis took hold, the reading was 85.2 while the long-term average for the series – a barometer of economic health – is 87.2.

This suggests consumer confidence is “down but not entirely out”, according to Mr Hughes.

Although the lift in the consumer mood in September mirrors gains in confidence in the US, UK and the euro zone, the improvement in the Irish survey was comparatively modest, he added.

“Our sense is that this may reflect a greater sensitivity on the part of Irish consumers to concerns about the coronavirus and its potential economic impacts.”

Unemployment concern

A slight easing in negativity about the broad Irish economic outlook was the main reason for the improved sentiment this month, although only one in 20 consumers expect the economy to strengthen in the next 12 months, with seven in 10 expecting further weakness.

Consumers have become increasingly concerned about unemployment, reflecting the difficulties some sectors of the economy have faced since the pandemic.

They were slightly less downbeat than before about their household finances, with two-thirds seeing no change in their spending power in the year ahead. Among the other third, the majority expect their finances to get worse rather than better.

A “modest” rise in spending plans may have been triggered by retailers’ discounting and the reduction in VAT, Mr Hughes said.

“The success of such measures could play an important role in underpinning job prospects through the remainder of the year.”