Consumer sentiment strengthens

Consumer sentiment rose in June to its strongest level since October 2007, according to the latest survey from KBC/ESRI.

The index rose from 65.3 in May to 67.9 in June, as consumers were more positive on the buying climate and the economic outlook improved. The index hit a record low in July 2008 when it fell to 39.6.

"The improvement reflects a more positive assessment by consumers of both the current situation and also the forward looking components of the index," said the ESRI's David Duffy.

The index measuring current conditions rose to 88.4 from 82.5 in May, and the expectations index, which focuses on how consumers view prospects over the next 12 months, rose from 53.7 to 54.1. Consumers' outlook for the economy was at its most optomistic since September 2007.

"Expectations rose as there was some improvement in consumers' perception of the economic outlook," said Mr Duffy. "However, consumers remain concerned about the outlook for employment and for their household finances over the next 12 months."

The current increase in Irish consumer sentiment is in contrast to the euro zone, where June sentiment improved only marginally from May. This was the lowest reading for the euro zone since September 2009.

Weakened morale among European consumers has been blamed for the decline as concerns grow that living standards will come under pressure due to government austerity measures.

"For the past couple of years, European consumers have been cushioned to a notably greater extent from the fallout of the financial crisis," said KBC's Austin Hughes. "Now, as Irish consumers appear to see a little more light at the end of the tunnel, their continental counterparts are beginning to contemplate a more difficult future."

Irish consumer sentiment appears to be following a similar track to the US, where a recent survey showed it also rose in June.

However, the survey did not signal a spending surge by Irish consumers, although a modest improvement was likely. Mr Hughes described the figures as "encouraging".

"Although they suggest Irish consumers are still very cautious and conditions remain difficult, they also hint that fear is fading and many consumers are beginning to sense an improvement in general economic conditions and their own circumstances," he said.

"These results point towards an economic recovery that may be modest and fragile and one that is not being felt by all, but, nonetheless, they suggest the Irish economy is moving in the right direction."