Consumer confidence improved slightly further in July, but the strains caused by inflation continue to affect some households, the latest Credit Union Consumer Sentiment Index shows.
While the mood among consumers brightened fractionally this month as holidays and summer sales encouraged a pick-up in spending plans, a slight drop in people’s assessment of their own financial circumstances indicates ongoing caution, economist Austin Hughes said in his analysis of the survey.
This implies “restrained rather than runaway spending” in the months ahead, he said.
“Overall, the tone of the survey suggests the pressures facing Irish consumers are fading but far from finished,” he added.
The index, compiled in partnership with Core Research, increased to a reading of 64.5, the July survey of 1,000 people showed, up from 63.7 in June. This marks the fourth consecutive month that sentiment has improved.
The ongoing recovery from the 14-year low in sentiment recorded last September, when energy bills and other inflation worries weighed heavily on households, implies that consumer fears are continuing to ease, Mr Hughes said.
However, with sentiment in July still well below the levels seen in February 2022, before the Ukraine war began, the recovery in confidence has some distance to go before it can be considered complete.
“It isn’t the worst of times, it isn’t the best of times,” Mr Hughes said, pointing to a “strong sense of an Irish consumer still being buffeted by strong economic and financial cross-currents” in an uncertain world.
Consumers’ view of the broad economic outlook improved modestly. The survey took place in the wake of the publication of the mid-year exchequer returns and the Government’s summer economic statement, both of which “heightened expectations” of significant increases in public spending and income-supporting tax adjustments in Budget 2024, Mr Hughes noted.
Consumers were “a little more cautious” about the outlook for the jobs market, which may have been prompted by ongoing concerns about the technology sector as well as the closure of Tara Mines.
While the annual rate of inflation is easing, the 6.1 per cent rate reported for June suggests that cost-of-living pressures remain “substantial”, with the sharp sequence of European Central Bank (ECB) interest rate increases proving an “additional source of pain and problems” for a range of households.
Irish consumers expect “a clear, if limited, easing” in inflation in the year ahead, additional questions in the survey indicated.
