January bargains help improve sentiment among consumers

CONSUMER SENTIMENT improved in January, with shoppers becoming slightly more positive about their spending power and economic conditions.

The overall KBC Ireland/ESRI Consumer Sentiment Index rose to 48.7 last month, compared to 44.4 in December. The January reading remains above the all-time low of 39.6 recorded in July 2008, but it is still some way off the January 2010 level of 64.6.

The increase in the index last month was driven mainly by an improvement in consumers’ perception of their present situation.

The value of the sub-index of current economic conditions rose to 74.2 in January, from 68.5 the previous month, as consumers found their spending power boosted in the post-Christmas sales.

David Duffy, an economist with the ESRI, said January was viewed by consumers as a good time to buy major items. The January boost tends to be followed by a more negative reading in February and Mr Duffy said he expected this pattern to continue.

Austin Hughes of KBC Ireland said the “current conditions” component jumped less than in previous years, suggesting that consumers remained fairly cautious.

Mr Hughes said it would be wrong to conclude that the January figures suggest a turnaround in sentiment and spending, pointing out that consumers’ confidence had weakened considerably in recent months. Instead, the January figures indicated that consumers had already “discounted a lot of bad news”, he said.

“There must be some risk that when post-Christmas bills and post-budget pay packets are examined, sentiment could decline further in the next couple of months.”

The second element of the survey, which focuses on how consumers view their financial prospects and the economic outlook over the next 12 months, rose by a more moderate amount to 31.5 last month, from 28.1 in December.

COLD SPELL WEATHER BITES FOR RETAILERS

THE SEVERE weather hit retailers hard in December as shoppers stayed away and footfall declined 2.6 per cent, compared to the same month in 2009.

The national footfall index, compiled by global information services company Experian, showed that overall footfall trends in Ireland remained relatively consistent last year, with an average fall of 1.3 per cent compared to 2009.

The final quarter of the year declined 1.1 per cent compared to the same period a year earlier.

“The tough conditions experienced by retailers in Ireland have continued throughout 2010 . . . The usually buoyant Christmas shopping period did not materialise,” said Experian Ireland’s Mark Anderson.

“Online-only retailers have typically benefited from Christmas shoppers, but now most high street brands have a presence on the web. That has the potential to dilute footfall.”

A more severe contraction was seen in Northern Ireland, where footfall fell by an average of 4.7 per cent throughout the year, and the final quarter slumped by 7.2 per cent. It is possible that those southern shoppers who were visiting Northern Ireland to take advantage of the value there have now stopped travelling due to increased VAT and fuel prices,” Mr Anderson said.