Consumer Sentiment Improves Again in January

The overall KBC Ireland/ESRI Consumer Sentiment Index increased in January to 101.1 from 90.5 in December. The 3-month moving average increased from 87.1 in December to 92.3 in January.

 Commenting on the results Ciara Morley, ESRI, said

“Consumer sentiment grew strongly in January. Last year also began with an improvement of sentiment. Typically, sentiment improves in January, at least in part reflecting the winter sales, followed by a more subdued figure in February. We expect this pattern to continue and as a result some moderation might be anticipated next month.

“Sentiment was improved for every category. In particular, consumers have become more positive about their current and the outlook for their household finances, as well as becoming more positive about the buying environment for major household durables. As pointed out above, the latter may well reflect a winter sales effect”

“The Index of Consumer Expectations increased to 93.2 this month, from 83.8 in December. The Index of Current Economic Conditions, 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, increased from 100.4 in December to 112.8 in January.”

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

“The key driver of the rise in confidence in January is a notably more positive view of household finances. For the past few years sentiment in relation to the Irish economy as a whole has been steadily improving but consumers remained worried about their own financial situation. The January survey shows that for the first time since mid-2007 more consumers expect their household finances to improve rather than worsen in the year ahead. This marks a notable change in thinking.

“We think several factors contributed to greater optimism in regard to personal finances. For the first time since 2008, Budget measures should boost rather than drain purchasing power. An improving property market may also be having a positive ‘wealth effect’ on confidence while low or negative inflation also means incomes stretch further. In this regard, we think tumbling oil prices through the survey period may have had a significant effect on sentiment.

“The improvement in sentiment in January was broadly based. This lessens the possibility of a major retracement in the months ahead even though there may be some seasonal retracement as sales end and bills related to Christmas spending arrive. The details suggest the economic recovery should be more broadly felt in 2015 and this should prompt healthier household spending.”