'Strong' rise in consumer sentiment

THE MOOD of Irish consumers improved during October, according to the KBC Ireland/ESRI Consumer Sentiment Index, which rose to 54.2 from 49.6 in September to reach its highest level since April, 2008.

The corresponding figure for October 2008, was 42.0.

Noting the “surprisingly strong increase” in sentiment, KBC said although the global upturn has helped, it did not entirely explain the improved sentiment.

Falling prices, low borrowing costs, the National Asset Management Agency (Nama) and less pessimistic forecasts for Irish economy may all have helped, according to KBC, which noted that consumers remain cautious and warned of possible correction in the November data.

The underlying trend, carried by a three-monthly moving average, rose a smaller amount, from 49.3 to 50.8.

Consumers’ assessment of their personal finances also improved over the last month.

David Duffy of the ESRI said: “Once again the rise in consumer sentiment is mainly due to improved consumer expectations. . . . Although there has been an improvement in sentiment consumers continue to be cautious. Three out of four consumers remained concerned about the outlook for the labour market.”

Austin Hughes of KBC Ireland said the findings hinted that Irish consumers may believe the economy has reached a turning point.

“They expect conditions to remain tough for some time to come, but there is a sense that the absolute worst may be behind us,” he said.

People may be prepared to give the Government the benefit of the doubt on Nama, Mr Hughes said.

KBC said the rise in Irish consumer sentiment last month had to be seen in the context of mixed results from other economies. There was a sharp rise in the GFK measure of UK consumer confidence, for example, while consumer sentiment across the euro zone posted only a marginal gain.

Retail Ireland, the Ibec group representing the sector, called for a major reduction in excise duty and VAT from November 1st.

Retail Ireland director Torlach Denihan said: “The figures show that confidence remains fragile. The key to both economic recovery and to securing employment in the retail sector is to restore consumer confidence.

“It is critical that Government does not increase taxes in the forthcoming budget and that the bulk of the adjustment to the public finances takes place on the spending side.”