Consumer sentiment rebounded in May to recover almost a third of the record loss it suffered in April on the onset of the Covid-19 crisis, but remained close to historic lows.
The KBC Bank consumer sentiment index climbed to 52.3 from 42.6 in April, its largest month-on-month improvement since January 2015, but remained far below the 77.3 recorded in early March.
The April fall was the sharpest month-on-month decline in the survey's 24-year history and May's level is within the lowest 5% of readings recorded, the authors said.
"While the improvement should be seen as encouraging, the level of the May sentiment survey remains comparable with responses seen through the more difficult moments of the financial crisis a decade ago," Austin Hughes, chief economist at KBC Ireland, said.
The country's bars, restaurants and non-essential retail outlets were shut in March and people were urged to stay at home, measures that will be gradually relaxed during the coming three months, starting this week.
The damage to the economy has been severe, with the unemployment rate, including those receiving emergency Covid-19-related jobless benefits, shooting up to 28.2% from 4.8% in two months.
The survey's authors linked the improvement to a slowing of the spread of the disease in recent weeks combined with the beginning of the phased easing of the lockdown.
But eight out of ten consumers still expected the economy to weaken in the following 12 months down from nine in ten in May.
The survey found that 86% of consumers expected the Government to introduce cutbacks in public spending or tax increases within the next two to three years.
The threat of a return to austerity could translate into an economic second wave, Austin Hughes said.
