Consumer confidence hit a 23-month high this month, according to KBC Bank Ireland’s latest consumer sentiment index.
The index rose to 85.8 in May from 77.9 in April, as the Covid-19
virus incidence declined and the vaccination rollout picked up pace.
It now stands at its strongest level since June 2019, when it was at
90.7, and is in line with the 25-year series average of 86.8.
“These metrics suggest that Irish consumers are increasingly focusing on a post-pandemic world and beginning to consider what the ‘next normal’ might look like,” said KBC Bank Ireland’s chief economist Austin Hughes.
KBC Bank said the stronger sentiment was driven by easing concerns about jobs and the general economic outlook, as well as improved optimism about household finances and spending.
The index has recorded an increase for four consecutive months – for the first time in more than five years – as Irish consumers believe that the worst of the pandemic may be behind us, in terms of economic and financial risks.
The May survey saw all five main elements of the consumer sentiment index post “meaningful gains” on their readings in the previous month.
The sharpest improvement was in relation to employment.
“That presumably was driven by the prospect of a return to work in a range of sectors where the May survey period saw the announcement of the upcoming easing of health related restrictions,” said Mr Hughes.
In addition, a steady stream of new job announcements continued, underpinning expectations for a materially brighter outlook for employment.
As a result, the jobs component of the sentiment survey saw the first positive balance since June 2019.
There was also a material improvement in the general economic outlook in May as economic indicators and commentary remained broadly positive.
“At the margin, increasing concerns around the outlook for housing may have constrained this element of the survey somewhat, but moderate gains in recent official data on house prices and transactions pointed to a market currently in recovery mode,” Mr Hughes said.
The May survey shows a clear easing of nervousness about household finances.
“It should be emphasised that Irish consumers remain relatively cautious about their personal financial circumstances but May saw a positive balance in relation to prospects for household finances in the next twelve months for the first time since May 2019,” Mr Hughes said.
According to the index, roughly one in six consumers expect their financial circumstances to improve in the coming year, compared to about one in eight that envisage a deterioration.
On a more positive note, the spending component of the sentiment index increased to its best level since March 2020.
“Again, it might be noted that this result suggests a level of spending in coming months that is healthy rather than white hot,” said Mr Hughes.