Consumer sentiment improved slightly in October as consumers took some comfort from Government measures introduced in its annual budget to support household spending, a new survey shows today.
The Credit Union Consumer Sentiment index climbed to 46.1 in October from 42.1 in September, recovering part of a 11.3-point decline from August.
The index was previously sponsored by KBC Bank Ireland, who is in the process of leaving the Irish market.
Despite the improvement, only 10 of the previous 320 readings in the near 27-year history of the survey were weaker than October’s reading. The index had a reading of 81.9 in January.
Economist Austin Hughes said that recent falls in petrol prices, alongside budget measures supporting household spending power, could have helped consumer sentiment in October.
A slight easing in Irish inflation when many consumers were braced for ever-accelerating price pressures could also have contributed to the improvement, he added.
In September, the Government announced a budget package of €6.9 billion of permanent spending increases and tax cuts, along with €4.1 billion in one-off measures to help consumers with an inflation shock.
“While Irish consumers may be gloomy, the small improvement in confidence in October hints that they still have the capacity to see some silver lining in a generally dark economic sky,” Austin Hughes said.
“In a survey period that saw notable downgrades to a range of economic forecasts at home and abroad, and repeated signals from the European Central Bank that further large interest rate increases are planned for coming months, our judgement is that this pick-up primarily reflects a response to Budget 2023 support measures,” he said.
The economist said today that the impact of recent developments in the UK on consumer sentiment is not completely clearcut.
“To the extent that British economic policy problems weaken the UK economy, this would weigh on the Irish economic outlook but there is not the same mechanically damaging spill-over that caused Irish consumer sentiment to slump during the Brexit process,” he explained.
“On the other hand, it could be argued that high profile UK policy difficulties may encourage Irish consumers to draw some comfort from a notably more stable, sustainable, and supportive domestic economic policy stance in this country,” he added.
Austin Hughes also said that despite a slight improvement in spending plans, the buying climate among consumers remains “overwhelmingly negative”.
“This suggests household spending will continue to be constrained in the run-up to Christmas, but the October survey also hints at some element of resilience that should support confidence and consumer spending in coming months,” he added.