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Consumer sentiment weakens in February – KBC/ESRI

There was a slight weakening in consumer sentiment in February, according to the latest consumer sentiment index from KBC Bank Ireland and the ESRI.

The index hit a nine year high in January so a decline from those levels was not unexpected.

The report’s authors point to a historic softening in the index in February as the post-Christmas festivities end and related bills arrive.

The index declined to 96.1 in February from 101.1 in January, reversing just under half of the gains in that month.

“Our sense is that the underlying trend in Irish consumer sentiment remains solidly positive. The February reading is more than ten points higher than a year ago and the second highest in nine years,” Austin Hughes, chief economist with KBC Ireland remarked.

He points out that, although the trend is improving, the index is still quite volatile.

“Through the past year there have only been two occasions when there have been monthly gains in two consecutive months and no sequence of three successive increases,” he stated.

Mr Hughes said this reflected a still uncertain global economic environment and ongoing pressures on household finances that mean Irish consumers remain nervous and restrained.

“Our sense is that the pull-back in Irish consumer sentiment last month is largely domestic in nature but mixed readings from confidence measures elsewhere suggest the global economic backdrop is still a source of some uncertainty to consumers here as well as their counterparts in other countries,” he explained.

The weakening in Irish consumer sentiment in February mirrored a similar drop in the comparable US sentiment measure which declined from an eleven year peak posted in January.

The Euro area consumer confidence indicator showed a third monthly improvement in February but the details suggest nearly half of the countries in the single currency area reported weaker confidence readings.

UK consumers reported a broadly unchanged level of confidence in February as greater optimism about the British economy offset increased concerns about household finances.

Four of the five main elements of the Irish consumer sentiment survey weakened month on month in February.

The exception was the jobs component of the survey which posted its strongest reading since January 2007.

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