Consumer confidence at highest level in over a year with budget surpluses cited as reason for optimism

Most people think the squeeze on household budgets has got further to go, according to the latest Credit Union Consumer Sentiment Index.

Consumer sentiment hit a 14-month high this month. It increased to 62.4 in May.

The May reading represents a marked improvement on the 14-year low of 42.1 recorded last September.

Massive budget surpluses building up in the Exchequer was cited as the main reason consumers felt more optimistic.

Many consumers now expect some of these funds to be used to pay more financial supports to them to cope with rising costs.

Economist Austin Hughes, who compiles the sentiment index with Core Research, said: “It might be inferred that Irish consumers are increasingly aware of much increased domestic ‘fiscal space’ highlighted by media reports referencing expected cumulative fiscal surpluses of €65bn over the next four years.”

The optimism in this country is in contrast to the US where the darkening mood of consumers is being attributed to a sense that the economy is set to weaken later this year.

Another important factor being cited is repeated concerns around a possible debt default by the US government.

But consumers in this country are still cautious on spending plans.

Only one in five Irish consumers believe the worst of the cost-of-living-crisis is behind us.

But three in five fear the financial squeeze on households will get worse, the index findings show.

This means consumers who feel the cost-of-living crisis has not yet peaked outnumber those who feel the worst is behind us by roughly three to one.

Mr Hughes said: “Irish consumers remain scarred by the experience of the financial crisis of just over a decade ago, and this is reflected both in subdued sentiment readings and swollen savings rates at present.”

He said most Irish consumers see cost-of-living pressures still firmly embedded.

“While economic fears have eased markedly, household finances remain under pressure and this is weighing on spending plans,” he added.