The consumers cool off after heat wave


Austin Hughes, KBC Ireland. Photo: Mac Innes Photography
Austin Hughes, KBC Ireland. Photo: Mac Innes Photography

John Mulligan

Consumer sentiment is brought to a boil after a summer heat wave in which alcohol, ice and barbecues are consumed.

Two separate reports released this morning show that the continued warm weather, which continued in July, boosted consumer sentiment and overall retail sales.

The consumer sentiment index of KBC Bank Ireland / ESRI reached 107.6 points in July, compared to 102.1 points in June. This was the strongest monthly increase since January, pushing the index to its best level since March.

However, the upswing obscured the uncertainty as a result of Brexit – only seven months away – and global trade tensions, which keep consumers cautious about their future spending.

The latest report from Ibec Retail Ireland, released this morning, shows that retail sales increased 3.4 percent in the second quarter of the year.

"From the prolonged cold spell and heavy snowfall in March to the drought in June, the weather in the first half of the year had a huge impact on Irish retailers," said Thomas Burke, director of Retail Ireland.

He added, "With the recent good weather, our members have reported strong demand for seasonal products like fans, ice cream, barbecues and patio furniture, among others, and this surge in demand has pushed retailers' supply chains to the limit, especially in June."

But while the KBC / ESRI report this morning recognizes the buoyancy of retail sales due to the beautiful weather, it is not optimistic that the feel-good factor will persist until the fall.

"While the July figures reflect the generally positive outlook for Irish consumers, we would like to emphasize that this is characterized by a considerable degree of caution and sensitivity to bad news in a still uncertain economic environment," he noted ,

She said the surge in Irish consumer purchasing schedules in July indicated by his review reflects increased purchases compared to June, coupled with summer sales, the recent "182" license plates and summer vacation requirements.

"Irish consumer confidence growth in July was at odds with weaker US and UK indicators," said KBC Ireland chief economist Austin Hughes.

"While the sentiment survey is driven by the economic temp, we believe that exceptionally warm weather could have led more Irish consumers to see the glass half full and not half empty in July," he added.

"Unfortunately, this indicates a cooler mood and spending in the coming months."

He added, "We feel that many consumers have difficulty reconciling reports of good labor market conditions with the reality of modest wage growth and persistent threats to job security."

The KBC / ESRI report found that 29% of consumers in July felt that their situation had improved, while 18% of respondents felt that their situation had deteriorated. That was still the most positive since February. However, the report states that recent figures still suggest a "modest and uneven improvement" in household finances throughout the Irish economy.

The Retail Ireland report also showed that retail sales growth in the second quarter was not broad-based.

"While many retail categories have been fueled by the long dry spell, other sectors, such as department stores, fashion and footwear, and hairdressing, have been less than normal in the reporting period, with declines in sales," said Burke.

"The continued cold weather in April and May weighed on women's summer wear, while record highs at the end of the quarter impacted visitor numbers," he said.

Irish Independent

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