CONSUMER SENTIMENT fell in May as the uncertainty around the future of the euro zone and the fiscal treaty referendum weighed on consumers.
The KBC Bank Ireland/ESRI consumer sentiment index fell from 62.5 to 61 last month, the first time it has fallen since December.
The decline was seen as an “inevitable correction” following a steady rise in sentiment since the start of the year.
However, KBC said this did not mean there was a change in trend, with the three-month moving average of the series showing a rise in May to 61.4 from 60.1.
“We don’t think the May reading signals a dramatic shift in thinking among Irish consumers. Instead, it emphasises the fragile and patchy nature of what is a fairly tentative turnaround in consumer sentiment and in the broader Irish economy,” said KBC chief economist Austin Hughes.
“The 1.5-point drop in the index between April and May has to be seen in the context of the 3.3-point average monthly gain seen thus far in 2012. So, last month’s decline was relatively modest.”
The weakened sentiment was likely a result of domestic influences, the survey said, with European consumer confidence rising marginally during the month.
“The broad array of US indicators of consumer confidence produced mixed results but the closest counterpart to the Irish measure, the sentiment index compiled by the University of Michigan, registered a modest gain that was enough to bring it to its highest level in four years,” it said.
The sharpest drop was observed regarding the general economic outlook, with increased worries over the deteriorating situation in the euro zone blamed for the fall.
A similar pattern was seen in Spain, Italy and the Netherlands.
The survey pointed to some bright spots, noting the jobs section was particularly encouraging, prompted by recent employment announcements.
“While Irish consumers remain cautious about the employment situation, the increasing frequency of new jobs announcements of late and signs of a stabilisation in the Live Register seem to have prompted a less negative assessment of the outlook for jobs,” KBC said.
The number of consumers predicting a further rise in unemployment in the next 12 months fell below 50 per cent for the first time since January 2007.
“Providing Irish consumers aren’t swept away by sporting euphoria or gloom this month, the June survey results will probably confirm a picture of a consumer who has become slightly less fearful of late but still faces substantial financial pressures,” KBC said.
However pressure on household finances is expected to continue, with almost one-third of consumers predicting their spending power would weaken in the coming year.
