Consumer sentiment weakened again in May, showing that consumers remain concerned about the outlook for the economy, jobs and pay.
The KBC Ireland/ESRI consumer sentiment index fell to 45.5 in May from 46.8 in April and reflects the impact of higher taxes on wages last month as well as broader concerns about the economic prospects. Higher fuel costs were also a cause of worry.
However, KBC Ireland says that while the current level of the index is weak, the trend in consumer sentiment during the last few months suggests that confidence may be in the process of bottoming out.
It notes that the three month moving average rose marginally last month - the first increase since January.
The drop in consumer sentiment was broadly based with four out of the five components worsening last month. However a surprising aspect of the May survey was a substantial jump in the buying climate as households now think it may be a good time to buy big-ticket items due to the heavy discounting by many retailers.
KBC says it is not surprising that Irish consumer sentiment remains depressed. It says that job fears and lower after tax incomes are undoubtedly weighing on sentiment.
It says that a very uncertain outlook means Irish consumers continue to adopt a very cautious approach to spending.
'If you compare the mood of Irish consumers in May to similar surveys for other economies, it is fairly clear that powerful 'feelbad' forces are at work here,' commented KBC chief economist Austin Hughes.
He says that US consumers feel the worst of the news on jobs and the economy may be behind them. He also points out that they have been buoyed by rising share prices.
'In Ireland, however, widespread job losses, lower after tax incomes and great uncertainty about economic prospects are clearly weighing on sentiment. If anything, the surprise is that consumer sentiment isn't lower than the May survey indicates,' he states.
