Consumer sentiment edges up to near pre-Iran war level

Consumer sentiment rose slightly in August ⁠to close to the level it stood at before the Middle East conflict stoked concerns about the cost of living, a survey showed.

The Credit Union Consumer ‌Sentiment Survey ⁠rose to 63.2 from 61.6 in July.

The index stood at 65.2 in February before dropping to a 40-month low of 53.3 ‌in April following a sharp rise in fuel ⁠costs as a result ‌of the conflict.

While the improved reading remains ⁠well ‌below the long-term survey average of 83.1, the index has averaged a subdued ⁠64.1 over the last five years, even as ⁠the economy has continued to grow strongly.

“This suggests this pressure (on consumers) is sustained as well as substantial,” the survey’s authors said.

“The general tone of the August sentiment survey still suggests that Irish consumers are nervous about the general economic outlook and negative about their own financial circumstances,” economist Austin Hughes said.

“The August survey period was notable for comparatively few notable economic developments and, with weather remaining exceptionally good, it may be that many consumers took something of a short ‘holiday break’ from what continue to be serious economic and financial concerns,” he added.

He also noted that similarly positive monthly changes in consumer confidence were reported for the euro area and the UK in spite of ongoing increases in motor fuel prices, while US consumer sentiment fell significantly on increased worries about the outlook for activity and inflation.

David Malone, CEO of the Irish League of Credit Unions, said that the slight uptick in consumer sentiment is welcome but the general tone of the August survey highlights the financial challenges facing many Irish households at present.

The August Credit Union Consumer Sentiment Survey also asked participants whether they had increased or reduced their spending in various areas and why this was the case.

65% of Irish consumers said they are spending more now than a year ago on necessities such as food and a broadly similar 61% of consumers are spending more on household bills.

There is also a marked trend towards reduced spending on going out and purchases of discretionary items.

Increased spending on groceries is the most common experience across all demographics in the past year but the proportion increased notably among those aged over 45.

This response was also positively correlated with income whereas those saying they were facing difficulty making ends meet were more than twice as likely to say they had cut back spending on groceries than those without problems in this regard.

The sense of a spillover from price pressure in specific areas such as groceries into more broadly based increases in living costs is suggested by 61% of consumers who indicated their outlays on other household bills were now higher than a year ago.

While most consumers say they are spending more on necessities now than a year ago, relatively few are spending more on discretionary items and going out, while notably larger numbers say they have cut back spending in these areas.

Again, nearly all key demographics report greater numbers cutting back than increasing spending, a result that likely reflects the broadly based nature of the pressure on living costs, the survey shows.