Consumer confidence took a knock in August as households worried about the prolonged effects on the economy as the number of Covid-19 cases increased again, a major survey has shown.
The monthly KBC Bank Ireland survey showed that although sentiment had recovered from a low point in April amid the national lockdown that consumers were less confident in August than in July.
Austin Hughes, the bank's chief economist, said that the pattern of swings from pessimism to optimism and back again can be expected in the coming months and the latest sentiment reading was not totally unexpected.
The survey showed consumers were downbeat in many of their responses. They were significantly less confident about the outlook for jobs and "not surprisingly, the broader outlook for the Irish economy was also downgraded" with even fewer people saying the economy will strengthen over the next 12 months.
There was "entrenched pessimism" about the outlook, Mr Hughes said.
"There have been some very positive elements in recent spending data that, together with the trend in consumer confidence in recent months, point to a clear turnaround in sentiment and spending from April’s low-point.
"However, the muted survey results for both July and August suggest that we may be seeing a limited rebound rather than the first signs of a lasting recovery in Irish economic conditions of late," he said.
Mr Hughes said that pent-up demand over the previous few months may help outweigh the pessimistic message from the survey.
"It is possible that the sentiment survey could overstate the weakness in consumer spending in the near term. The key unknown is whether sentiment or spending will adjust as 2020 progresses," he said.
Consumers will weigh the extent to which Covid-19 will cause longterm economic damage.
