Figure 1 displays the ESRI’s consumer sentiment index for Ireland. While Irish consumer sentiment increased following the EU-IMF bailout over recent months it has been relatively stable. However, in July there was a slight drop in the index. It fell from 56.3 in June to 55.9 in July.
Looking at the two sub-indexes which comprise the consumer sentiment index it is clear that this fall has been driven by consumer expectations. Consumers’ views of Ireland’s current economic conditions actually increased in July. Perhaps suggesting that Irish people are actually starting to perceive the current economic situation to be stabilising. However, consumers’ future expectations of the economy have decreased. This may be due to the recent news of more taxes (housing charge) and a hard budget to come in December.
The falling outlook for future expectations is likely to translate into lower retail sales as consumers continue to save as oppose to consume.
Justin Doran is a Lecturer in Economics, in the Department of Economics, University College Cork, Ireland.