Irish consumer sentiment hit a three-year high during June, a closely watched indicator has shown.

The KBC Ireland/ESRI Consumer Sentiment Index rose to 67.9 this month, which is its highest level since October 2007.

This compares to a figure of 65.3 in May and to the index’s all-time low of 39.6 in July 2008.

According to David Duffy of the ESRI, the improvement reflects a more positive assessment by consumers of both the current situation and also the forward-looking components of the index – the Index of Current Conditions rose to 88.4 compared with 82.5 in May, while the Expectations Index increased to 54.1 from 53.7 in May.

“Expectations rose as there was some improvement in consumers’ perception of the economic outlook. However, consumers remain concerned about the outlook for employment and for their household finances over the next 12 months,” Duffy explained.

Consumer sentiment points to modest recovery
According to KBC economist Austin Hughes, the June consumer sentiment results are “encouraging”.

“Although they suggest Irish consumers are still very cautious and conditions remain difficult, they also hint that fear is fading and many consumers are beginning to sense an improvement in general economic conditions and their own circumstances.

“These results point towards an economic recovery that may be modest and fragile and one that is not being felt by all, but, nonetheless, they suggest the Irish economy is moving in the right direction,” he added.

Hughes also pointed to a divergence in consumer sentiment between Ireland and the US and Europe in June: “Consumer sentiment improved modestly in Ireland and the US in June but morale among European consumers was hit by growing concerns that living standards will weaken as pension and welfare entitlements are cut.

“For the past couple of years, European consumers have been cushioned to a notably greater extent from the fallout of the financial crisis. Now, as Irish consumers appear to see a little more light at the end of the tunnel, their continental counterparts are beginning to contemplate a more difficult future.”