Irish consumer sentiment fell in in June

Irish consumer sentiment fell in in June, highlighting the continuing difficulties that Irish households face.

The KBC Bank Ireland/ESRI Consumer Sentiment Index dropped to 56.3 from 59.4 in May. While the monthly change was relatively modest, the June reading is the weakest since February and also resulted in the first decline in the underlying trend - - as indicated by the three month moving average - - since December 2010.

Sentiment improved materially in early 2011 but against a backdrop of Irish consumers faceing significant pressures in terms of a still threatening economic outlook, an ongoing risk of job loss and the prospect of a further squeeze on household spending power from future budget measures and looming ECB rate increases. In these circumstances, it is most unlikely that sentiment or spending could exhibit a straight line upswing.

Any progress for Irish consumers and for the economy as a whole is more likely to come in a two steps forward one step back fashion. In this context, it is significant that consumer sentiment ended the first half of 2011 notably stronger than it ended 2010 (December 2010 reading, 44.4). The fact that sentiment is still lower than a year ago (June 2010, 67.9) simply reflects the trauma seen in the latter stages of last year.

The drop in Irish consumer sentiment in June mirrored weaker readings from similar measures for other countries this month. The corresponding US indicators dropped more than expected to continue a series of lacklustre readings through 2011.

The ‘flash’ estimate of Eurozone confidence also edged lower although it remains broadly consistent with a patchy improvement in sentiment in Europe. The coincidence of weaker sentiment across several countries in June testifies to a significant element of shared uncertainties and concerns in the current global environment. Whether it may be specific influences such as the ongoing Eurozone sovereign debt crisis or broader concerns relating to incomes and employment, a range of worries prevail that are not completely unique to Irish households.

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 favorable replies minus the percent giving unfavorable 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.