October sees small bounce in Irish Consumer Confidence

Posted on: 25 Oct 2024

• Limited but broadly- based rise in sentiment to three-month high

• Easing in job concerns and cost pressures boost buying plans

• Household finances outlook sees marginal post-Budget increase 

• Special questions focus On Budget ’25

  • Only half of consumers see Budget ’25 improving their living standards (we set out varied reasons why)

  • Consumers see housing and health as major disappointments of Budget ’25

  • Social welfare increases regarded as most positive aspects

Speaking on the release of the October sentiment survey data and analysis, David Malone, CEO of the Irish League of Credit Unions noted; ‘'The small uptick in Irish consumer confidence in October is encouraging in that it appears to reflect a solid Irish economy and some small easing in cost-of-living pressures. As we head towards the turn of the year, the survey serves to emphasise both the opportunities and challenges that Irish consumers now face, circumstances that they can face more confidently with the support of their local credit union.’'
 

Summary

Irish consumer sentiment improved modestly in October as reduced nervousness about job loss and a slight easing in cost-of-living pressures coupled with Budget support measures combined to boost confidence.

While there was small recovery, this month, the details of the October survey don’t suggest any major change in Irish consumer thinking of late. An uncertain world, an ongoing squeeze on personal finances for many households and longstanding concerns around infrastructure shortfalls in health and housing remain key drivers of consumer thinking.

There is little sense that Irish consumers think Budget ’25 will dramatically improve the outlook for their household finances but there was a marginal improvement in expectations for the next twelve months and a moderate increase in spending plans. 

Section I

October sentiment survey suggests Irish consumers a little less nervous but no sense that Budget ’25 will spark spending bonanza

The Credit Union Consumer Sentiment Survey (in partnership with Core Research) shows an index reading of 74.1 for October, marking a modest improvement from the September figure of 71.9.

After a loss of positive momentum in the survey readings for August and September, the October reading at least tentatively points to a less worried Irish consumer but, with the current level of the sentiment index still some distance below the long-term survey average of 84.3, it remains the case that Irish consumers are still guarded in their thinking about their own financial circumstances and the broader economic backdrop.

In contrast to the small improvement in Irish consumer sentiment in October, there was a fractional weakening in the preliminary reading of the comparable confidence measure for the US. The authors of the University of Michigan US consumer sentiment survey noted that although US inflation had eased, ‘consumers continue to express frustration over high prices. They also suggested that consumers may be reserving judgement about the longer-term outlook for the US economy until after the looming election.

October saw a small improvement in Euro area consumer confidence. The combination of notably lower inflation and falling interest rates likely helped in this regard but increasing concerns about the health of the Euro area’s largest economy, Germany may have tempered the gain in sentiment.   
 

Improvement in sentiment small but broadly based

All five key elements of the Irish consumer sentiment survey improved in October, a result only seen once previously in the past nine months. This development suggests a broadly based if limited uplift in the mood of Irish consumers this month.

In light of widespread media commentary about the risks to the economy from a ‘giveaway’ Budget, it is notable that there was little change in consumers expectations for the twelve-month outlook for the Irish economy between September and October, with a fractional increase in this element suggesting no material shift in consumer thinking on Irish economic prospects.    

The most notable improvement in consumer thinking in the past month has been in relation to employment prospects.  The survey period saw the release of unemployment data showing some easing after a small uptick in the summer months as well as income tax receipts for September that suggested solid employment and income gains. However, our sense is that the improvement in this element may have owed much to the lack of significant layoff announcements this month that contrasted with high-profile and diverse job losses in each of the past few months.   

Consumers not expecting a big Budget boost to spending power but buying climate improves 

All three elements of the sentiment survey related to household financial conditions registered gains in October. Perhaps surprisingly, in view of most commentary on Budget ‘25, that suggested a dramatic ‘giveaway’ would benefit Irish consumers substantially, the smallest improvement was in relation to the twelve-month outlook for household finances.

The fractional change in October in consumer expectations for their personal finances may have been at odds with much media commentary on the scale of Budget giveaways but these subdued survey results broadly tally with Post-Budget distributional analysis by the ESRI that noted ‘Budget 2025 tax and welfare measures will result in small real income gains for households in 2025’.

In this context, it should be noted that the changes announced in Budget ’25 that specifically affect consumer spending power in the shape of alterations to income tax and social welfare payments sum to about €4.7bn. In the context of Aggregate household income of around €175bn in 2024 and somewhere in the region of €185bn in 2025, these adjustments are broadly comparable to what might be termed ‘neutral’ indexation that balances against expected increases in consumer prices and wages. As such, they fall some significant distance short of amounts likely to produce a dramatic improvement in Irish households’ financial circumstances.

Overall, the tone of relevant sentiment survey responses is consistent with consumer perceptions of a non-negligible but notably less inflated boost to their spending power than might have been suggested by commentary on the Budget. Moreover, it bears repeating that any modest boost to Irish consumers spending power in Budget ’25 is unlikely to reverse the cumulative income drop suffered by many households through the cost-of-living crisis. We return to the topic of consumers response to Budget measures in some detail in Section II of this analysis.

The October sentiment reading saw a somewhat larger, albeit still limited, improvement in consumers’ perceptions as to how their financial circumstances had changed over the past twelve months than how they felt they would evolve in the year ahead. A range of factors may have encouraged the view that there has been some easing in cost-of-living pressures of late.

The survey period saw motor fuel costs fall in Ireland in spite of Budget ’25 carbon tax increases although EU data suggest Irish heating oil costs rose in October.  In addition, after ECB interest rate cuts in July and September, notably softer Euro area inflation saw expectations build during the October sentiment survey period that the ECB would cut rates again in October (which they duly did). September inflation data were also released and showed that Irish inflation tumbled to its lowest level in three and a half years.   

The combination of easing inflation and generally supportive Budget ‘25 measures likely prompted some improvement in buying plans in October although a number of price-discounting ‘events’ may also have played some role. Overall, the October survey suggests some prospect of a modest uptick in Irish consumer spending in the final months of the year.  

All three elements of the sentiment survey related to household financial conditions registered gains in October. Perhaps surprisingly, in view of most commentary on Budget ‘25, that suggested a dramatic ‘giveaway’ would benefit Irish consumers substantially, the smallest improvement was in relation to the twelve-month outlook for household finances.

The fractional change in October in consumer expectations for their personal finances may have been at odds with much media commentary on the scale of Budget giveaways but these subdued survey results broadly tally with Post-Budget distributional analysis by the ESRI that noted ‘Budget 2025 tax and welfare measures will result in small real income gains for households in 2025’.

In this context, it should be noted that the changes announced in Budget ’25 that specifically affect consumer spending power in the shape of alterations to income tax and social welfare payments sum to about €4.7bn. In the context of Aggregate household income of around €175bn in 2024 and somewhere in the region of €185bn in 2025, these adjustments are broadly comparable to what might be termed ‘neutral’ indexation that balances against expected increases in consumer prices and wages. As such, they fall some significant distance short of amounts likely to produce a dramatic improvement in Irish households’ financial circumstances.

Overall, the tone of relevant sentiment survey responses is consistent with consumer perceptions of a non-negligible but notably less inflated boost to their spending power than might have been suggested by commentary on the Budget. Moreover, it bears repeating that any modest boost to Irish consumers spending power in Budget ’25 is unlikely to reverse the cumulative income drop suffered by many households through the cost-of-living crisis. We return to the topic of consumers response to Budget measures in some detail in Section II of this analysis.

The October sentiment reading saw a somewhat larger, albeit still limited, improvement in consumers’ perceptions as to how their financial circumstances had changed over the past twelve months than how they felt they would evolve in the year ahead. A range of factors may have encouraged the view that there has been some easing in cost-of-living pressures of late.

The survey period saw motor fuel costs fall in Ireland in spite of Budget ’25 carbon tax increases although EU data suggest Irish heating oil costs rose in October.  In addition, after ECB interest rate cuts in July and September, notably softer Euro area inflation saw expectations build during the October sentiment survey period that the ECB would cut rates again in October (which they duly did). September inflation data were also released and showed that Irish inflation tumbled to its lowest level in three and a half years.   

The combination of easing inflation and generally supportive Budget ‘25 measures likely prompted some improvement in buying plans in October although a number of price-discounting ‘events’ may also have played some role. Overall, the October survey suggests some prospect of a modest uptick in Irish consumer spending in the final months of the year.  
 

Section II  

Budget ’25; A giveaway ‘game changer’ or much ado about relatively little?

As usual, the Credit Union Consumer Sentiment Survey (in partnership with Core Research) included a couple of supplementary questions on topics of current interest.

As in September, this month’s survey asked a representative sample of Irish consumers about Budget ’25. This time we asked how much Budget measures would affect their household financial circumstances and how they would rate Budget measures in a number of areas that they, as consumers, had identified as priorities in the September survey.

Will the Budget make us better off?

First of all, we asked consumers what impact they expected Budget ’25 measures would have on their standard of living. The results shown in the diagram below suggest only a very small number of consumers -just 4% of those surveyed-expect Budget ’25 to bring about a significant improvement in their living standards.


A further 42% expect the Budget will lead to a slight improvement in their living standards while 47% don’t think Budget measures will lead to an improvement in their living standards.

In broad terms, these results suggest that roughly half of Irish consumers expect some boost from Budget ’25 to their living standards while the remainder don’t expect an improvement. At first glance, this might seem to suggest that most Irish consumers significantly underestimate the impact of Budget measures on their financial circumstances. However, several explanations can be advanced for these survey findings.

First of all, as indicated above, the tax and welfare changes announced in Budget ’25 are broadly comparable in scale to the impact of indexation-which in principle means they act to broadly maintain rather than boost or reduce living standards.

Second, a substantial element of Budget ’25 measures, roughly €2bn out of €4.7bn, took the form of temporary cost-of-living measures that because they won’t form part of ‘permanent income’ may not be seen as impacting on living standards (unless living costs unexpectedly fall!).

Third, some consumers may be focussed on the enduring loss in their spending power because of the cumulative increase in living costs in recent years. As a result, any helpful impact of Budget ’25 measures may be judged to be only providing a partial offset to losses rather than an improvement in living standards.

Fourth, the September consumer sentiment survey contained a supplementary question that found that improving health and housing infrastructure were the key issues that Irish consumers wanted to see addressed in Budget ’25. Those responses might hint that access to suitable healthcare or housing are seen as key drivers of many consumers assessments of their living standards at present. Where this is the case, Budget ’25 measures are unlikely to have markedly altered consumers sense of their current circumstances.

Finally, in circumstances where the overall boost to spending power is modest in the aggregate, it should be remembered that financial health or otherwise varies widely across the spectrum of Irish households  It seems very likely that the specific circumstances of particular consumers, whether these relate to larger than average household bills and/or borrowings relative to their disposable incomes or simply very limited incomes, may be such that Budget ’25 measures don’t fully offset ongoing pressures on their personal finances.

Perhaps reflecting the scale of the recent cost-of-living shock on household finances, the demographic profile of those consumers who indicated that they didn’t expect Budget ’25 measures to improve their living standards doesn’t entirely fit into a particular set of profiles (a result that may highlight the practical difficulties in exclusively targeted fiscal measures).

That said, those who indicated that the Budget would not improve their living standards were more likely to be consumers based outside Dublin than in the capital, perhaps reflecting a greater incidence of lower incomes and higher fuel bills.

Female consumers were also more likely to say Budget ’25 measures wouldn’t improve their circumstances than males, again possibly because of income differences.

In the same vein, those reporting difficulties making ends meet were much more likely to say the Budget wouldn’t improve their financial position than those saying they can make ends meet with ease.

Older consumers were more likely to say Budget ’25 measures won’t improve their living standards than their younger counterparts, with a steadily increasing share of negative responses across age groups that peaked in the 55-64 year age group and fell markedly among over 65’s. The ‘peak negativity’ in later middle age may reflect substantial pre-committed financial outgoings among such households as well as concerns about pension adequacy.    
 

Did Budget ’25 make a difference on the big issues?

The Credit Union Consumer Sentiment Survey (in partnership with Core Research) for October also asked an additional question in regard to the areas highlighted by consumers in the September survey as key issues for Budget ’25.

Whereas the sentiment index itself and the question asking about Budget impacts on living standards are primarily focussed on the immediate economic and financial implications of the Budget, responses in the diagram below set out consumer thinking on Budget ’25 in a much broader context.  

Consumers were asked to assess Budget ’25 measures in a variety of areas using a rating scale ranging from very poor to excellent. One caveat in relation to these results that should be mentioned in this context is the limited  capacity of Budget day announcements in themselves to clearly satisfy consumers as to how and where additional funds and/or policy changes might produce markedly improved outcomes in policy areas.

More generally, while there is significant scope within Budget policy to focus attention and resources on areas of importance, it should be noted that Fiscal policy is neither equipped in design or delivery terms to provide speedy or substantive resolution of shortcomings in many complex policy areas.  Viewed from this perspective, it could be argued that adequate to excellent ratings might be deemed as broadly positive scores whereas poor or very poor ratings are clearly negative.



As the diagram above indicates, the most common rating in the vast majority of instances was ‘adequate’, a result that suggests no great sense of a transformational Budget in any area.

Significantly, as the ordering of the table above makes clear, consumers rated Budget ’25 most negatively in regard to housing and health measures, the two areas that had been singled out in the September sentiment survey as by far of most importance to consumers in terms of priorities for them for the Budget.

The share of negative responses in housing and health is markedly greater than for any other heading. While the large and lasting nature of these problems means that a major policy initiative was unlikely to come in Budget ’25 for a range of reasons,  the survey results emphasise the extent to which Irish consumers see housing and health as the critical issues facing the country today.

In contrast, the increase in social welfare rates was seen by consumers as the most positive element of the Budget and, again, this aspect was rated notably more positively than all others.

Perhaps surprisingly, given media criticism of the fiscal stance as well as the lower priority attributed it in the September survey, the second most positive rating for Budget ’25 was in terms of ensuring the stability of the public finances. Arguably, this is consistent with a sense from other elements of survey responses that Irish consumers judge that, in general terms, the Budget ’25 package did not commit exceptionally large additional amounts to any area. 


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 the 4^th and 15^th October 2024.