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Consumer sentiment unchanged in December – survey

Consumer sentiment was unchanged in December from November, as concerns about the economic outlook appeared to be offset by improved personal finances and end-of-year spending.

The Irish economy is on course to be the best performer in the European Union for the fifth consecutive year.

But concern about the vulnerability of the economy to an unruly British exit from the bloc has weighed on consumer sentiment.

The KBC Bank Ireland/ESRI Consumer Sentiment index stood at 96.5 in December, unchanged from the previous month.

The index had hit a 17-year high of 110.9 last January.

The report’s authors said the stability appeared to be as a result of consumers’ “considerable difficulties in assessing both the likelihood and possible impact of potentially important changes in their circumstances in the year ahead.”

Sentiment appears to be at a tipping point depending on whether Britain crashes out of the European Union without a deal on March 29, they said.

Only 26% of respondents said they expected a stronger economy over the next 12 months compared with 32% expecting weaker conditions.

This marks the first time there have been more pessimists than optimists on this question since 2013.

However, 26% of consumers reported an improvement in their household finances over the past year compared with 20% reporting a deterioration.

“The headline figure looks steady, but the details suggest that consumers are really struggling to make sense of what’s happening in the economy,” KBC Bank Ireland’s chief economist Austin Hughes said.

“There’s a split between the macro influences, which are deteriorating rapidly, and micro or more personal finance influences that are still improving, even if it’s unevenly,” the economist added.

External influences, especially Brexit, are weighing on consumers’ minds at present and as the deadline looms, those fears have grown.

Mr Hughes says that consumers are now worried about just how bad things could get in the coming months. That has meant that – for the first time since August 2013 – more consumers are pessimistic about the outlook for the Irish economy in the next 12 months.

At the same time, however, they are also looking more favourably upon their current personal financial position – partially due to them making a more positive reassessment of the modest improvements enjoyed over recent years, with the Christmas spirit perhaps having an impact as well.

“26% say things have gotten better over the past year, 20% say things have gotten worse, so it’s not a boom for consumers – but it is a little bit better,” Mr Hughes said. “Ahead of Christmas they probably felt “eat, drink and be merry for tomorrow we Brexit!'”

However he is quick to add that the cautiousness that has been a hallmark of the Irish consumer in recent years remains.

“There’s no sense that consumers are throwing away anything they’ve earned over the last year,” he said. “It has been a struggle for many and we’re seeing that reflected in retail reports, not just in Ireland but in the UK as well.”

Normally this kind of scenario is blamed on a level of uncertainty, which does certainly exist at present. However Mr Hughes says that the influence of Brexit means that there are realistically only two paths down which things can go this year.

On the one hand, with a hard Brexit, the public’s worst fears may become true. However some kind of a deal – or even a kicking into touch – should see sentiment improve significantly.

“Here it looks like consumers are either going to move to the left or the right,” he said.

“It’s either a sense that things will continue on a reasonably positive trend of improving employment, improving incomes – maybe not great but okay. Or else Brexit is going to come, and nobody knows how awful that might be for the average Irish consumer, and that’s what worrying them.

“It’s either a Brexit bounce or a Brexit bump over the next couple of months,” he added.

Article Source: http://tinyurl.com/kbwqb42

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