Consumer confidence grew again in July, according to new data from KBC Bank Ireland.
It marks the third consecutive month of growth in the bank's sentiment index, however the rate of increase was lower than what was recorded in May and June.
It leaves the index well behind the figure from July 2019, following a sharp dip in March and April due to the impact of Covid-19.
Speaking on RTÉ’s Morning Ireland, KBC Bank Ireland chief economist Austin Hughes said the slower rate of recovery recorded in July could reflect the slower rate of economic reopening undertaken by the Government.
"I think the pattern has been a very severe downturn, significant improvement through May and June and now only a marginal gain in July," he said. "That probably reflects a view on the part of consumers that while the downturn wasn’t as bad as they’d initially feared, the rebound that they’re now seeing is not as strong as they had earlier hoped.
"It is influenced by issues such as maybe the slower pace of reopening of the economy, it’s influenced by some gloomy economic forecasts where there’s been downward revisions to the outlook for economic growth by a number of institutions lately, and it’s also influenced by what consumers are hearing and reading about the path of the virus both in Ireland and globally."
Mr Hughes said the "fear factor" was still entrenched in consumers and it was far easier for sentiment to slip rather than move forward.
Part of that was due to the scarring left from the last recession, he said.
During July consumer outlook for the wider economy, and the country’s employment prospects, slipped.
However the view around personal finances over the next year, as well as plans for major purchases, actually improved.
Mr Hughes said this did seem somewhat contradictory, however it illustrates the strange economic dynamic that has been created by the Covid-19 pandemic.
"People felt, initially, that perhaps the downturn wasn’t going to be quite as severe whereas they were much more cautious about household finances," he said. "Now they’ve built up maybe a little bit of savings, or they have income that has stretched a little bit further, so there are these sort of disconnects in the relationship between the path of the economy and household finances at the minute.
"But the reality is if consumers are nervous about the outlook for the economy, then they are going to become nervous about the outlook for their household finances."
He also noted that the improvement in household finances was relatively limited - with just 1 in 20 saying they expected to be better off in the next 12 months.
One key development that could influence the next month’s sentiment index is the Government’s July stimulus, which is expected to be published this week.
Mr Hughes said that the plan needed to be ambitious in scale in order to give people confidence that it was going to have an impact. However it also needed to be realistic in what it sets out to achieve in order to be credible.
He also said it was important that the plan was a relatively simple one.
"No consumer expects that things are going to be back to where they were in January any time soon," he said. "But there is a sense that if they can build an economic pathway, if we can see measures that are more or less clear in terms of the economic improvement they can bring, that you will see consumer sentiment improve."