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Consumer Sentiment Decreases in August
By Austin Hughes, Chief Economist, KBC Bank Ireland
Sep 16, 2014

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The overall KBC Ireland/ESRI Consumer Sentiment Index decreased to 87.1 in August, from 89.4 in July. The 3-month moving average rose to 85.9 in August, from 83.3 in July.

Commenting on the results Ciara Morley, ESRI, said

  • “Consumer Sentiment fell slightly in August, following an increase in July. The decrease is driven by worsening perceptions of the current economic environment and the outlook for the coming year.”
  • “The index of current economic conditions fell to 98.3, from 103.5 in July. Households are less positive about the current buying climate, most likely due to the end of the summer sales.”
  • “The index of consumer expectations fell very slightly in August, to 79.6 from 79.9 last month, as households were negative in their perception of the economic outlook for the next year. Households continue to feel positive in their views of the labour market and in their expectations for their financial situation over the next 12 months.”

In addition, Austin Hughes, KBC Bank Ireland, noted:

  • “The slip in consumer sentiment last month from the seven year high seen in July isn’t surprising. The underlying trend in confidence is still upwards but it is uneven. While most recent data are pointing towards a clear recovery in the Irish economy, most consumers aren’t seeing this reflected in their own financial circumstances. From their perspective any improvement remains tentative and somewhat distant. This means sentiment readings are likely to remain ‘choppy’ until there is a broadly based improvement in household spending power.”
  • “While there was some improvement in consumers’ views on the outlook for their household finances compared to July, roughly twice as many expect a deterioration in their spending power in the year ahead as foresee an improvement. So, there is no sense in these numbers that consumers anticipate a ‘giveaway’ Budget next month. In light of some recent comments on Mr Noonan’s increased scope to manoeuvre, it will be interesting to see if this element changes in the September survey.”

The Consumer Sentiment Index comprises two sub-indices; an index of consumer expectation that focuses on how consumers view prospects over the next 12 months and an index of current economic conditions, focusing on consumers’ present situation.

The Index of Consumer Expectations is based on consumers’ perceptions of their future financial situation, their economic outlook for the country as a whole and employment expectations. This sub-index fell slightly to 79.6 this month, from 79.9 in July.

The Index of Current Economic Conditions is based on how consumers feel about their current financial circumstance compared to 12 months ago, as well as their perception of the current buying environment for large household purchases. The Index of Current Economic Conditions fell to 98.3 from 103.5 in July.

The Consumer Sentiment Index, the Index of Consumer Expectations and the Index of Current Economic Conditions remain at levels equal to the first half of 2007.

Austin Hughes
Chief Economist
KBC Bank Ireland plc
Sandwith Street
Dublin 2
T: 01 664 6892 / 01 664 6889

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