The KBC Bank consumer sentiment index climbed to 52.3 from 42.6 in April, its largest month-on-month improvement since January 2015, but remained far below the 77.3 recorded in early March.
The April fall was the sharpest month-on-month decline in the survey’s 24-year history and May’s level is within the lowest 5% of readings recorded, the authors said.
“While the improvement … should be seen as encouraging, the level of the May sentiment survey remains comparable with responses seen through the more difficult moments of the financial crisis (a decade ago),” Austin Hughes, chief economist at KBC Ireland, said.
Ireland in March shut bars, restaurants and non-essential retail outlets and ordered people to stay at home, measures that will be gradually relaxed during the coming three months, starting this week.
The damage to the economy has been severe, with the unemployment rate, including those receiving emergency COVID-19-related jobless benefits, shooting up to 28.2% from 4.8% in two months.
The survey’s authors linked the improvement to a slowing of the spread of the disease in recent weeks combined with the beginning of the phased easing of the lockdown.
But eight out of 10 consumers still expected the economy to weaken in the following 12 months down from nine in 10 in May.
The survey found that 86% of consumers expected the Irish government to introduce cutbacks in public spending or tax increases within the next two to three years.
The threat of a return to austerity “could translate into an economic ‘second wave’”, Hughes said.