Consumer mood is up, with tentative signs the worst of price rises are over

The fall in fuel prices, the payment of the electricity credits and the ability of many households to manage Christmas spending are being cited for a surge in consumer confidence.

he mood of consumers this month may also have been impacted positively by bargain-hunting in the post-Christmas sales, economist Austin Hughes said.

There are tentative signs people may have concluded the worst of the price rises are behind us, he said.

The Credit Union Consumer Sentiment Index for January hit a seven-month high. Consumers are still nervous but their mood is more upbeat.

Mr Hughes, who compiles the consumer index, said: “I put it down to softer oil prices, a sense that households got through Christmas spent better than they had feared and, last but not least, a seasonal switch-off from dismal news to time spent with family and friends.”

The rise in consumer sentiment this month mirrored gains in the US and Germany that have been put down to falling fuel costs.

The index rose from 48.7 in December to 55.2 in January.

This put the index at its strongest level since last June.

The 6.5 point monthly increase was the largest since a seven-point gain in January 2022.

Mr Hughes said people may have switched off from bad news over the festive period.

“Our sense is that the switch over Christmas and new year away from the normal routine to less news-focused time spent with family and friends may have eased consumer concerns somewhat.”

He said there is a sense among consumers that this year could prove difficult rather than disastrous.

This is suggested by a marked pick-up in spending plans in the January sentiment reading.

“In part, this likely reflects bargain-hunting in the post-Christmas sales, but even that implies that consumers are both able and willing to spend provided the offering is sufficiently attractive.”

There are tentative signs that many consumers sense the worst could be over in terms of the intensity of price pressures facing their households, he said

However, the index is still low compared to its historical average.

Mr Hughes said this suggests Irish consumers remain very much aware of the economic and financial challenges that the new year holds.

He said the receipt of the energy bill credits and Christmas bonus welfare payments may also have assisted in the upgrade to the outlook for household finances.

There was a modest improvement in the January sentiment report in relation to consumer thinking about prospects for the Irish economy this year.

This was likely driven by positive news on the public finances, as well as continued low unemployment data during the survey period.

A special question as part of the survey about consumers’ outlook over the next five years revealed that households expect their finances to weaken.

Mr Hughes said the downbeat assessment for the next five years may be due to a judgment that persistent pressures from the global environment are likely to take a toll on domestic growth prospects.

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