Irish Economy 2013: Consumer Sentiment Rose Sharply In June

12 Jul 2013

Irish Economy 2013: Consumer sentiment was much improved in June to 70.6, from 61.2 in May. The 3-month moving average jumped to 63.5, from 60.0 in May. The average for the first half of this year is 62.4, higher than 60.0 for the first half of last year.

The Consumer Sentiment Index comprises two sub-indices; an index of consumer expectation that focuses on how consumers view prospects over the next 12 months and an index of current economic conditions, focusing on consumers’ present situation.

The Index of Consumer Expectations is based on consumers’ perceptions of their future financial situation, their economic outlook for the country as a whole and employment expectations. This sub-index increased strongly to 61.7 from 51.3 last month.

The Index of Current Economic Conditions is based on how consumers feel about their current financial circumstance compared to 12 months ago, as well as their perception of the current buying environment for large household purchases. The Index of Current Economic Conditions increased by 7.7 to 83.7 in June.

The data was obtained from telephone interviews during the first two weeks of the month with around 800 completed questionnaires. The data were re-weighted in line with gender, age and level of educational attainment to ensure the data is fully representative of the national population of adults.

Each index is calculated by computing the relative scores (the percent giving favourable replies minus the percent giving unfavourable replies (the balance), plus 100) for each question used in the different indices. Those who reply “Don’t Know”, “Remain the same” are excluded from the index calculations. Each relative score is rounded to the nearest whole number. The sum of the relative scores is then divided by the base period total for each index.

Kevin Timoney, ESRI, said: "Consumer Sentiment was much improved in June, rising from 61.2 last month to 70.6, the highest level attained since October 2007.

“The increase follows a period of several months with little change in the index. However, in the past a sudden rise in sentiment has not always been maintained – this has been especially true of recent years. As such, some reduction relative to the June reading may occur next month.

“The improvement in the indices represents a move away from a negative perception towards a more neutral or slightly positive view, suggesting cautious optimism. The index of current economic conditions increased by 7.7 to 83.7 in June. The index of consumer expectations strengthened by 10.4 to 61.7 this month, its highest reading in nearly six years.”

In addition, Austin Hughes, KBC Bank Ireland, noted: “The increase in sentiment in June likely exaggerates the improvement in the mood of the Irish consumer of late and may be vulnerable to some retracement but it still probably points to some pick up in confidence. Signs of an improvement in both the jobs market and the property market of late appear to have eased consumer fears. It remains the case that Irish consumers are cautious and the improvement in sentiment is still fragile but the June sentiment reading is consistent with the view that the Irish economy is edging forward rather than slipping backward.”

 “The June sentiment reading may have been boosted by exceptionally good weather during the survey period. In principle, this shouldn’t happen because the survey only asks specific questions about the economy and household finances. However, in practice, there may sometimes be an influence. We did some basic statistical analysis that suggests consumer sentiment isn’t usually influenced by the Irish weather- we should be used to it but in periods of exceptional sunshine, confidence tends to be a little bit higher. The sense that the consumers’ mood is only influenced by exceptional weather conditions and not by the norm might also be supported by our failure to find any statistically significant link between Irish consumer sentiment and rainfall.”

Source: http://www.finfacts.ie/irishfinancenews/article_1026272.shtml