Irish consumers’ optimism around the economy increased in May but they were also more cautious about their own finances, according to the latest KBC Bank Ireland / ESRI Consumer Sentiment Index.
As a result, consumer sentiment last month was down slightly compared to April, according to the index, standing 0.2 points lower at 98.5.
The figure is considerably higher than the one recorded in May 2014, however, and suggests a broadly positive outlook for the Irish economy.
However KBC Bank’s chief economist Austin Hughes said that the latest data highlights the continuing disconnect between the broader economy and consumers’ spending power.
The trend is positive and there is no sign of confidence slipping, he said, but consumers would need to see “a more tangible improvement in their own financial circumstances, or at least a very real prospect that this will occur before long” in order for there to be a further increase in optimism.
During the month consumers’ general economic outlook rose 2.8 points to 77, while the unemployment outlook gained 4.6 to pass the 100 mark.
Consumer expectation also improved, rising 0.4 points to 92.2.
The index of current conditions was down 1.3 points to 107.7, however, while consumers reported a less positive financial situation over the past twelve months - as well as a less optimistic outlook for their finances in the year ahead.
As a result there was also a slight decline in the major purchases index, which fell 0.2 points to 128.2.
“We cannot be sure exactly what caused consumers to be a little more downbeat about their personal finances in May but several possibilities suggest themselves,” said Mr Hughes.
“It could be the case that the roll-out of water charge bills served as a painful reminder of continuing pressures on household spending power.
“The ongoing recovery in oil prices might also have played some role as could significant increases in some elements of their living costs of late such as motor insurance. Finally, it might be that those consumers who are renting are also increasingly concerned by what may seem to be a relentless rise in accommodation costs.”
Mr Hughes said the overall figures did not signal any dramatic change in consumer thinking, but emphasised the “persistent divergence” between the challenging conditions experienced by Irish people and the positive news they are hearing about the broader economy.
