Irish consumers believe the worst of the pandemic is now “firmly behind them”, which will translate to a “solid if unspectacular” Christmas period in terms of consumer spending, according to the latest report from KBC Bank Ireland.
The KBC Bank Ireland consumer sentiment index increased to 74.6 in December from 65.5 in November. The December index is the strongest since March (75.5) and materially above the low point seen in April (42.6).
The report noted that Irish consumer sentiment “improved solidly” for a second month in December as significant signs of light both in terms of Covid-19 and the Irish economy emerged after what has been a very tough year for many households and businesses.
The survey period saw a declining trend in new coronavirus cases in Ireland and a related easing in domestic health-related restrictions that coincided with positive news on vaccines.
Positive data
“Together with very positive Irish economic growth data and a continuing flow of new job announcements, this helped ease some of the concerns that have weighed on confidence and consumer spending through the past nine months,” the report said.
It also pointed out that fluctuations in consumer sentiment have tended to move in step with changes in the trend in coronavirus cases in Ireland.
“Encouragingly, it seems that Irish consumers are responsive to good as well as bad news in relation to the coronavirus,” it said. “On this basis, it would seem that the December survey might suggest Irish consumers believe the worst of the pandemic is now firmly behind them.
“While 2020 ends with a December sentiment reading of 74.6 that is well below the opening figure of 85.5 seen in January, this should be seen as an encouraging outcome given the scale of challenges faced by consumers during the year.
“Our sense is that these numbers will translate to solid if unspectacular Christmas period in terms of consumer spending.”
The December sentiment survey suggests that even though they are less fearful now than previously, Irish consumers are still “overwhelmingly cautious” about the outlook for their household finances in the year ahead.
Some 11 per cent expect they will be better off in 2021 whereas 21 per cent think they could be worse off.
Mixed conditions
In the same vein, the buying climate was the element of the sentiment survey that saw the smallest monthly improvement in December.
“For these reasons, we think Christmas will see mixed rather than marvellous conditions for those firms catering to Irish consumers,” the report noted. “That said, we would envisage some further modest trend rise in consumer spending in the final month of 2020.”
About two in five Irish consumers (41 per cent) said they had less money for Christmas spending than last year, while roughly the same proportion (39 per cent) said it was unchanged.
A majority (55 per cent) of respondents who said they were making ends meet with difficulty said they had less money for Christmas than a year ago. For those making ends meet with ease, less than one in four (23 per cent) said they had less money this year.
