Global Trade

03 Dec 2019

Irish Economy: Consumer sentiment rebounds from October low

The KBC Consumer Sentiment Index increased for the first time in five months in November, rebounding from the six-year low in October.

The increase in the index in November (from 69.5 to 77.1) was the largest monthly gain since January 2015, but the rebound is perhaps not surprising given that the previous survey responses were collected in mid-October – the recent height of Brexit uncertainty. All five primary components of the index recorded healthy gains in the month but, notably, these components remain well behind where they were 12 months ago. 

One of the features of the Irish economy this year has been the apparent disconnect between sentiment indicators, which suggest that the economy is fast losing all growth momentum, and the performance of the “hard” data, which suggest that growth remains robust and broad-based. Notwithstanding November’s increase, the much lower consumer sentiment readings of recent months are at odds with labour market improvements, disposable income increases and healthy levels of retail sales growth.

Tariff tensions rise again

The US took aggressive action on tariffs yesterday. First, it restored 25% tariffs on steel and 15% on aluminium from Brazil and Argentina. It also signalled that it was planning 100% tariffs on $2.4bn of French goods, following Paris’s decision to levy a ‘digital tax’ on profits from various US technology companies. Furthermore, the US stated that it was looking at raising tariffs on goods from the UK, France and Germany as retaliation to EU subsidies to Airbus. 

Meanwhile, there are few signs that the US and China will sign a ‘Phase 1 ‘deal any time soon, especially bearing in mind the current tensions between the two nations over Hong Kong. The US has set a deadline of 15 December. If an accord is not reached by then, Washington is set to lift tariffs on a further $156bn Chinese imports by 15%. 

The new uncomfortable trade background resulted in the S&P500 retreating by 0.9%, with Asia mainly in the red. Ironically, the Shanghai index was one of the few local gainers, rallying by 0.3%.

Black Friday skews UK BRC data

The UK BRC numbers look very poor on first appearances, with total sales sliding 4.4% on the year. However, to a large extent this was due to the timing of Black Friday, which was not captured in this year’s November survey but was in 2018. Adjusting for Black Friday, differences in the proximity to Christmas and developments in floor space, like-for-like sales came in 0.4% higher than a year earlier. 

Looking beyond the idiosyncratic factors, the figures point to an improvement in consumer spending as the key festive trading period approaches, with the BRC reporting that shoppers were more willing to spend after the risk of a no-deal Brexit was pushed out three months.

Lagarde testifies to the European Parliament

New ECB President, Christine Lagarde, spoke at her first European Parliament testimony yesterday.She didn’t expose any potential policy shifts ahead of their monetary policy meeting and announcement due on December 12th. She did however, confirm that the ECB are conducting a strategy review and that they will continue to be “resolute” in maintaining their price stability mandate in order to “support the economy and respond to future risks”. She didn’t acknowledge how long the review would take, but did say that it “will be guided by two principles: thorough analysis and an open mind.”

Economic Releases


EU 10.00 PPI