Consumer confidence rises as fear factor fades

 

CONSUMER SENTIMENT rose unexpectedly last month as uncertainty over the scale of the budgetary adjustment facing the State declined.

But the survey, which was conducted in the middle of the month, does not reflect the period leading up to the EU-IMF bailout and overall sentiment remains “overwhelmingly gloomy”.

The KBC Ireland/ESRI Consumer Sentiment Index rose marginally in November to 48.4 from 48.1 the previous month, reversing a steady decline in the three previous months.

However, the three-month moving average, which gives a more reliable indication of the underlying trend, declined to 49.6 from the previous reading of 54.0 and continued to point towards a “darkening mood among Irish consumers”. The November figure remains above the all-time low of 39.6 recorded in July 2008.

Three-quarters of respondents believe the economy will get worse in 2011 while some two-thirds expect their household income to deteriorate next year.

The survey also cautioned against extrapolating the trends “forward”, given the “momentous changes” under way at present.

KBC economist Austin Hughes said the November sentiment results were “encouraging as well as surprising”.

“They may be no more than a statistical correction following the very sharp fall in recent months but they could also hint that, even if Irish consumers remain very gloomy, confidence is not completely in freefall,” he said.

“It will take another month or two of data to say whether Irish consumer confidence is bottoming out but it could be that most people have already priced in a great deal of bad news about their future.

“While the emerging outlook in terms of general economic conditions and the prospects for household finances is likely to be very difficult, it may not be quite as awful as had been feared. It may also be that uncertainty is even more corrosive of confidence than a very painful reality,” he said.