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Consumer Confidence Starts 2025 Slightly Stronger

Posted on: 27 Jan 2025

  • Marginal monthly rise boosts sentiment to 6 month high
  • Emerging disconnect between easing concerns about household finances and growing worries about ‘macro’ outlook
  • US policy pivot impacts still a risk rather than a reality for Irish consumers but worries sufficient to dent spending plans
  • Special section focus on demographic differences in sentiment
    • Sentiment stronger among males than females and sentiment has weakened more among females in past five years
    • Sentiment stronger among those aged under 45 but has weakened more among younger consumers of late
    • Sentiment far weaker among those struggling financially 
 

Speaking on the release of the January sentiment survey data and analysis, David Malone, CEO of the Irish League of Credit Unions noted; ‘'It is positive that the January Sentiment Survey hints that consumers concerns about the cost-of-living crisis are easing somewhat although a pullback in spending plans suggests caution still dominates consumer thinking. Whether their spending or savings plans are big or small, Irish consumers can rely on their local credit union for support.' 
 

Summary

Irish consumers were a little less concerned about their household finances in January but also became slightly more cautious about the economic outlook and job prospects in particular.  The latter may have contributed to a pull-back in spending plans. These mixed circumstances translated into a marginal improvement in consumer confidence overall.

The fractional uptick in consumer sentiment in January suggests Irish consumers feel the worst of the cost-of-living crisis is behind them. However, they are now bracing themselves for a turbulent and threatening geopolitical climate on the basis of the campaign promises made by the new US president, Donald Trump.

The slight improvement in the mood of Irish consumers in January was sufficient to lift the consumer sentiment index back to its best level in six months (matching July 2024 also 74.9) which is also the highest since early 2022 when sentiment began to tumble as Russia invaded Ukraine and living costs began to accelerate sharply for consumers in Ireland and elsewhere.

However, the January 2025 sentiment reading is still well below the long-term series average, suggesting that while one set of pressures are easing, Irish consumers are very conscious that another substantial risk may just be unfolding. How far and how fast they feel that risk is building may become clearer in next month’s data.
 

Section I; Irish consumers cost-of-living concerns ease but economic risks increase further


The Credit Union Consumer Sentiment Survey (in partnership with Core Research) shows an index reading of 74.9 for January, marginally up on the 73.9 reading for December. 

Although there is no consistent seasonal pattern to the sentiment survey, there is a strong tendency for January readings to be notably stronger than the preceding December figures. In the past 25 years, there were only three times when sentiment weakened in January, in 2021 on fears of a second Covid wave, in 2009 when a crashing Irish economy prompted severe austerity measures, and in 2001 when the Dot-Com collapse appeared to threaten the youthful Celtic Tiger.

Against this backdrop, the marginal gain in January 2025 speaks of a still nervous Irish consumer. If the usual tendency for February data to reverse at least part of January’s gains is repeated next month, that will suggest that nervousness remains entrenched.

As the diagram below illustrates, the January number remains some distance below the long-term survey average of 84.3 and, as such, suggests that Irish consumer confidence is still quite constrained at the start of 2025.

If sentiment is still constrained in early 2025, it would be wrong to entirely ignore some encouraging signs. While there was only a fractional improvement in sentiment between December and January, this was enough to raise the sentiment index to its highest level since July 2024 (also 74.9).

This means that Irish consumer sentiment was last higher than at present in February 2022, after which the Russian invasion of Ukraine and the related surge in energy and food costs prompted a collapse in consumer confidence, resulting in a recent low-point for the sentiment index in September 2022 of 42.1.

The details of the survey suggest a clear easing in cost-of-living concerns among Irish consumers of late, but ‘macro’ nervousness has increased notably in the past two months, particularly in relation to job prospects. As a result, the recovery in sentiment has been uneven and limited.

Sentiment subdued or softer elsewhere in January

The fractional improvement in Irish consumer sentiment in January coincided with a similarly sized drop in the preliminary reading of US consumer sentiment. As was the case in the Irish survey, US consumers were less negative about their household finances but more negative about the economy. The authors of the US survey highlighted a significant increase in inflation expectations, particularly among lower income households as a notable feature of the January report. 

January saw a marginal improvement in Euro area consumer confidence but the current reading still suggests a relatively downbeat consumer in Europe.

More strikingly, UK consumer confidence saw a sharp fall to its lowest level in fourteen months. The drop was led by a marked downgrade of thinking on the UK economy. Although global factors may have played some role, a weakening of domestic economic momentum and related fears that this might give rise to a further increase in taxation or cutbacks in Government spending unnerved an already fearful UK consumer. 

These developments cast a further shadow over the Labour government's policy stance. With the threat of further fiscal tightening commanding a lot of media attention, it was not surprising that the significant weakening in UK consumer thinking on economic prospects also prompted a notably poorer assessment of household finances.  

Irish consumers sense ‘micro’ gains but fear ‘macro’ pains  

The details of the Credit Union Consumer Sentiment Survey (in partnership with Core Research) for January are mixed as three of the five main elements of the survey were weaker than December and two recorded stronger readings.

Two of the three elements that weakened month-on-month were ‘macro’ in nature. Irish consumer thinking on the general economic outlook and on the outlook for jobs in particular weakened compared to December. 

It should be recognised that while the focus of most consumers in Ireland and elsewhere is not normally on economic developments in the early new year, a range of reports and data, most notably buoyant end-year Exchequer returns, painted a picture of positive economic momentum at the turn of year. However, there was considerable media coverage emphasising major threats to the Irish economy that might crystallise in 2025, most of which centred on the risk of sharp and sudden changes in US policymaking.

Interestingly, the January sentiment survey saw Irish consumers downgrade the outlook for jobs substantially more than the general economic outlook.

In circumstances where measurement of multinational activity in Ireland is clouded by a range of statistical issues, the ebb and flow of jobs in multinational companies, both directly and downstream, may be seen by consumers as the most obvious and immediate indicator of changes in the temperature of the multinational sector.

While the January survey period saw a fractional rise in the unemployment rate and reports of a material decline in job openings and a rise in job seekers in late 2024, our sense is that these developments were dwarfed by concerns around prospective US policy changes and their impact on the Irish economy.

It is usually but not always the case that the ‘macro’ and ‘micro’ elements of the consumer sentiment survey move in the same direction, as some dominant factor colours consumer thinking on all aspects of their economic and financial environment.

It is rarely the case that there is such a clearly defined distinction between Irish consumers assessment of the broad economic outlook and their own financial circumstances as that seen in the January sentiment survey. However, there has been a growing divergence between these two survey aspects for the past three months, coinciding with the aftermath of the US election.
 

Cost concerns easing?

January saw a significant improvement in consumer thinking both in relation to how their household finances had evolved over the past twelve months and how they may develop in the year ahead. 

Although the survey period saw a marginal increase in motor fuel and heating oil prices, it also saw cuts in mortgage rates and strong indications from ECB officials of further interest rate cuts to come.

Arguably of greater significance, January saw the arrival of the increases in social welfare rates and tax credits announced in the Budget as well as the payment of the second instalment of the energy credit. With inflation markedly lower than a year ago, the survey may be capturing a still tentative sense that incomes are now rising at a faster pace than outgoings for many households.

It might also be argued that in contrast to the thinking of UK consumers at present Irish consumers do not see a more threatening economic outlook translating mechanically to fiscal tightening reflecting major differences in the current policy stance in the two economies.    

Normally, improving household finances would tend to trigger a pick-up in spending plans as would post-Christmas sales. We can’t be certain why buying plans fell in January.

Increased ‘macro’ concerns could be one factor and increased heating costs associated with a spell of severe weather might be another. Household finances still strained after a couple of years of surging costs and/or elevated pre-Christmas spending could also have played some role. Whatever the drivers, this result would seem to chime with some retail reports of relatively subdued post-Christmas sales.
 

Section II; Shared sentiments? How much of a role have differences in gender, age and earning power affected the way Irish consumers think about the economy and their household finances in recent years?

Each month, the Credit Union Consumer Sentiment Survey (in partnership with Core Research) includes a couple of supplementary questions on topics of current interest. For January 2025, we thought it might be interesting to assess the degree to which measures of sentiment vary according to demographic characteristics.

To do this, we compiled separate sentiment readings based on gender, age and ease of making ends meet for January 2025, January 2024 and January 2020. We examine the trend in sentiment across the various demographic groupings over these time periods in the paragraphs below.
 

It’s a man’s world and a woman’s worry?

The first demographic split we examined was between male and female respondents to the survey. The results are shown in table 2a below.

The table shows that sentiment among male respondents is significantly stronger than among females in both January 2024 and January 2025, but sentiment was almost identical in 2020.

First, it should be noted that it is frequently the case that reported sentiment readings are higher for males than females. A 2019 study using Irish consumer sentiment survey data found that males reported stronger sentiment scores than females in 61 out of 65 readings for the period 2003 to 2019 (Do men and women see the Irish economy differently? | LinkedIn).  

In the same vein, a number of studies ( see ‘Gender differences in optimism and asset allocation, Jacobson et al, 2014 or ‘Gender gap in consumer expectations’  Sandoval, 2024) using US consumer sentiment data report results suggesting  ‘that men tend to be significantly more optimistic than women regarding a broad range of issues, including the economy and financial markets’ (Jacobson 2014).   

Some studies suggest such differences are driven by a characteristic ‘overconfidence’ among males. An obvious driver in terms of differing perceptions of economic and financial circumstances is a disparity in incomes.

Central Statistics Office (CSO) data indicate that median pay in Ireland in 2023 was €47,187 for males and €39,039 for females. A broader CSO measure of median nominal equivalised income, that captures the circumstances of those outside the work force shows a narrower gap in 2023 but still higher incomes of €28,141 for males than €27,092 for females. Other CSO data show somewhat higher incidences of deprivation and consistent poverty for females than for males in 2023. 

The data in table 2a above suggest that over the past five years Irish consumer sentiment weakened markedly more-nearly three times as much- among females than among males. However, between 2024, sentiment improved among females while it weakened among males.

Detailed survey responses suggest that the main driver of differences in male and female responses to the sentiment survey in recent years have been differences in the assessment of trends in household finances.
Put another way, the survey results suggest the cost-of-living crisis was felt much more forcefully by females than by males. This may partly reflect income differentials, but it could also hint at differences in risk tolerances and/or differences in budgeting roles and responsibilities within households.   

With inflation easing, fiscal supports continuing, and incomes increasing somewhat faster, it might not be entirely surprising that consumer sentiment among Irish females improved between January 2024 and January 2025. However, as the table indicates, sentiment among females remains markedly lower than among males.

The further decline in sentiment among males through the past twelve months is driven by notably weaker thinking on employment and on the outlook for household finances through this period than was the case for females. However, it is worth noting that over the past twelve months, spending plans increased among males but weakened among females, suggesting that financial constraints may not be generally as binding for males as for females at present.     

How dented is the optimism of youth?

A separation of responses to the consumer sentiment survey from those aged over 45 and those aged under 45 was also undertaken this month and the results, with corresponding data for January 2024 and for January 2020, are shown in table 2b below.


As the table above indicates, in Ireland, consumer sentiment is consistently higher among those aged under 45 than among those aged over 45.

While this result may be at odds with many prevalent narratives, it does accord with the results of a recent Eurofound study(see p13 of Quality of life in the EU in 2024: Results from the Living and Working in the EU e-survey | European Foundation for the Improvement of Living and Working Conditions) as well as other academic work  (Is Happiness U-shaped Everywhere? Age and Subjective Well-being in 132 Countries | NBER) that suggests sentiment is likely to trough in middle age.

However, in contrast to these norms, table 2b above suggests that those under 45 have seen a much larger deterioration in sentiment than their older counterparts over the past five years.

This is driven in part by increased negativity in relation to the economic outlook and jobs but, to a much larger extent, the primary influence is a much sharper weakening in views on personal finances among the under 45’s than among the over 45’s.

Our sense is that the surge in housing costs over the past five years could be a key differentiator of the trend in sentiment in regard to personal finances between the over and under 45’s. It may also be that various fiscal support measures are perceived as more helpful by older age groups. Issues around job security, working from home and childcare may also be weighing more heavily on younger than on older age groups.  

For all these increased concerns, it should be remembered that in spite of the recent outsized deterioration, sentiment is still stronger among younger than among older age groups in Ireland in January 2025. Indeed, Ireland’s comparatively young population may be one of the factors in the finding of the Eurofound report cited above that Irish people are the most optimistic in Europe.

There’s a lot of month at the end of the money’
We also compared trends in consumer sentiment over recent years between those indicating difficulty making ends meet and those reporting that they could make ends meet with ease. The results of this comparison are presented in table 2c below.


Not surprisingly, sentiment among those struggling financially is substantially weaker than among those reporting no such problems-the gap between these two groups is markedly greater between alternative groups in the two previous comparisons.

It is also the case that the deterioration in sentiment through the past five years is much larger among those having difficulty making ends meet than among those making ends meet with ease. However, the trend through the past year is broadly similar, perhaps reflecting some impact from fiscal transfers and the easing in inflation.

Those struggling financially see economic and job market conditions more negatively than those not struggling and, not surprisingly, the gap is notably larger and has widened further over the past five years in relation to household finances.

In that sense, a strong implication of this analysis is that while cost-of-living pressures are not as intense as a year ago, they remain a major problem for many Irish consumers. Extrapolation from anecdote or personal experience remains a poor guide to understanding widely differing conditions facing consumers across the Irish economy at present. 

It should be noted that unlike the earlier comparisons, in theory at least, it could be that consumers might move back and forth from the group reporting difficulties making ends meet and the group reporting no such problems. However, as might be inferred from the survey results, the reality is that in most instances financial difficulties tend to be persistent.

It should also be noted that unlike the earlier comparisons where both groups accounted for similar size samples, there were nearly 30% more respondents to the consumer sentiment survey for January 2025 in the group reporting financial difficulty than in the group reporting they can make ends meet with ease.


The Credit Union Irish Consumer Sentiment Survey is a monthly survey of a nationally representative sample of 1,000 adults. Since May 2019, Core Research have undertaken the survey administration and data collection for the Survey. This tranche of the survey was live between January 8th and 17th 2024.