Consumer confidence drops as Covid cases surge
Consumer confidence has dropped to a seven-month low as Covid cases continue to surge, according to the latest KBC Bank Ireland consumer sentiment index.
The reading for November declined to 83.1, from 86.8 in October.
That is the largest monthly fall since January and brings the sentiment index to its lowest level since April.
As well as surging Covid cases, the report suggests that rising energy costs and renewed Brexit concerns are also likely drivers.
“Although the November reading does not point towards a markedly poorer outlook, it hints that consumers fear any improvement in the Irish economy,” said KBC Bank Ireland’s chief economist Austin Hughes.
“By extension, household financial circumstances may fall short of expectations that had built steadily if modestly since the spring,” he added.
However, Mr Hughes noted that the drop in Irish consumer sentiment this month is relatively modest in comparison to the fall seen in other countries.
US data showed an unexpected decline in sentiment to a new ten year low this month.
The weakest elements of the KBC Bank Irish consumer sentiment survey for November were in relation to the outlook for the economy and jobs.
“These had been the strongest areas in the October survey reflecting a range of positive forecasts and reduced concerns about changes to the global tax framework at that time,” said Mr Hughes.
Although the index did drop this month, the report states that it did not collapse, suggesting that consumers feel they will be able to better cope with the economic and financial consequences of the virus.
The report states that rising inflation also weighed on Irish consumer sentiment in November.
However, Mr Hughes said the relationship between the cost of living and consumer confidence is complicated.
“On occasion, rising inflation reflects an economic recovery or buoyant economic conditions and, consequently, can be associated with improving sentiment.
“At other times, higher inflation is unambiguously problematic. So, in the early 2000’s and just before the crash, rising inflation coincided with sliding sentiment,” he explained.
The report states that there is a very clear negative relationship between Irish consumer sentiment and global oil prices.
“Over the near 26 year history of the survey, there is a strong negative correlation between the two series.
“This would suggest that recent rapid increases in energy costs likely depressed sentiment in November,” Mr Hughes said.
In terms of spending plans in the run up to Christmas, the survey reveals that only one in eight consumers plans to spend more this Christmas than last, while one in three expect to spend less.
Just 12% of respondents said they have more money available to spend this Christmas than last, whereas 38% said they have less money available.
The report suggests that younger consumers are more likely to plan increased spending than their older counterparts.
Meanwhile, the 45-54 age group appear to be facing greater financial pressures than other demographics.