By Geoff Percival
A surge in Irish consumer confidence to a 17-year high is more likely a temporary improvement, quite likely to be undone this month, than a mark of a pending return to boom-time economics, according to a new study.
The latest monthly consumer confidence survey, jointly published by KBC Bank Ireland and economic think-tank the ESRI, shows confidence amongst the Irish public hit its highest level in January since February 2001.
“This was driven by a easing of household finance strains and a lessening in global concerns. The survey noted a continued upswing in domestic economic spending and an easing in concern over Brexit or how US tax cuts could trigger less multinational activity or job concerns.
“Sentiment registers a large monthly improvement in January; in four of the past six years, January’s increase was the largest monthly gain of the year. This ‘seasonal’ element of the January increase could be reversed in the next month or two,” warned KBC Ireland chief economist Austin Hughes.
“While the survey clearly highlights stronger sentiment of late — an unambiguously positive development for the Irish economy — we would be cautious not to overstate the significance of the 17-year high in the index...
“The results are better seen as signalling a marked improvement in confidence of late rather than indicating that Irish consumers feel their circumstances are now better than at any time in the past 17 years. Accordingly, the survey would be consistent with a healthy increase in consumer spending in the coming year but we don’t feel it points to a return to the boom,” Mr Hughes said.
While 56% of those surveyed expect the economy to grow this year, Mr Hughes struck a note of caution.
“It is common to have strong consumer sentiment readings for January in spite of the frequent assertion that late January is the most depressing time of the year.
“It should be noted that the survey is carried out largely in the first half of the month, when festive family time and shopping are still fresh in the memory.
“February sentiment readings tend to see a pull-back that may reflect some of the financial hangovers from the festive season.”