Consumer sentiment on the rise

Consumer sentiment unexpectedly rose to its highest level in two years last month, signalling an improvement in the mood among Irish consumers.

The overall KBC Ireland/ESRI Consumer Sentiment Index rose to 64.6 in January from 53.3 the previous month.

While the 11.3 point increase was the strongest monthly change since December 2004, KBC’s chief economist Austin Hughes cautioned against concentrating on the scale of the increase, admitting it looked “suspiciously large”.

“It is likely that the sharp improvement in the buying climate will be at least partly reversed in the February survey as Christmas sales end and bills arrive.”

“It seems clear that the mood of consumers is brightening, reflecting an easing in fears about economic prospects and perhaps a generally positive assessment of the December budget,” he said.

“It should be noted that the January reading doesn’t suggest irrational exuberance has taken hold of Irish consumers.

“Even after January’s increase, current levels of the survey suggest consumers remain fairly cautious but they are notably less pessimistic than they were.

The survey showed the underlying trend in consumer sentiment continues to improve.

The survey’s three-month moving average, which gives a better indication of the trend, rose to 57.2 from 53.7 in December.

ESRI economist David Duffy said: “The sharp improvement in consumers’ perceptions of the current environment reflects the view that January was a good time to purchase major items.

“Historically this component has improved every January, reflecting, at least in part, the winter sales, followed by a more subdued figure in February.

“We expect this pattern to continue and as a result some moderation might be anticipated next month.”