Consumer sentiment dropped sharply in January as the number of Covid-19 cases surged following the Christmas period, a survey found today.
The KBC Bank Ireland consumer sentiment index dropped to 64.9 in January from a nine-month high of 74.6 in December.
That compares with the 2020 average of 65 and a pandemic low of 42.6 registered during the worst of the first wave of infections in April.
The survey's authors said the fall was sharp, but "somewhat smaller than might have been feared" after Covid-19 infection rates hit all-time highs, with optimism about the vaccine roll-out a possible factor.
"It might be suggested that consumers are assessing the current elevated virus readings in the context of both the greater than expected resilience of the Irish economy and associated positive household income developments," KBC Ireland's chief economist Austin Hughes said.
"The likelihood is that both consumer sentiment and recent statistical releases are signalling that the impact of the pandemic on the Irish economy has at least thus far been a good deal less awful than feared," he added.
The drop in consumer sentiment was relatively large in comparison to that seen in other countries.
However, the survey suggests the decline was smaller than had been feared given the increased incidence of the virus.
In the US, the comparable indicator slipped from 80.7 to 79.2, for the Euro area the fall was 1.7 points to 15.5 and in the UK 28 from 26.
"Our sense is that the relatively modest declines elsewhere reflect optimism about the vaccine roll-out as well as specific 'domestic' factors," Austin Hughes said.
He said that Irish consumer sentiment tended to be "more responsive" to virus developments than elsewhere.
The Central Bank last week estimated that personal consumer expenditure fell 8.3% in 2020 and would grow 2.1% this year.
According to KBC Bank Ireland, the survey suggests that the Brexit deal may have given a limited boost to the January reading.
The findings show that 35% of consumers felt the agreement reached in late December between the EU and UK had lessened their concerns about the economic outlook.
A marginally larger 40% did not feel the deal had eased such concerns.
The survey reveals that the vast majority of consumers are currently focused on Covid-19 rather than Brexit.