Consumer sentiment improved in June for the second month running, according to KBC Bank, but cautious consumer behaviour indicates that there should be an “ambitious” fiscal stimulus to support a recovery.

According to chief economist Austin Hughes: “The details of the June sentiment survey suggest that the behaviour of consumers, some cautious and others cash-strapped, may serve to limit the scale and speed of a turnaround in activity and employment. Such concerns would support arguments for an early and ambitious fiscal stimulus, both to signal and support a recovery that minimises lasting damage from Covid-19.”

KBC’s Irish Consumer Sentiment Index climbed to 61.6 in June from 52.3 in May. It’s a marked improvement from the April low of 42.6 but remains a considerable distance from February’s pre-pandemic reading of 85.2 and even more so from June 2019’s 90.9.

Expectations for the general economic outlook have exactly halved since a year ago, while people’s expectations for their personal financial situation in a year’s time has fallen ny a quarter from a year ago.

As far as major purchases are concerned, the index rose to 89.6 from 63.7 in April, but is still considerably down on June 2019’s 122.4, indicating restrained demand in the near future for big-ticket items such as cars.

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Hughes (pictured) added: “The June survey results still reflect an overwhelmingly negative view on the outlook for the economy and employment. Responses on household finances were more nuanced. There was a significant improvement in expectations for household finances a year from now but, again, this needs to be seen in context. Only one in 20 consumers envisages better financial circumstances through the next twelve months, whereas one in three expects a deterioration.

He stated that positivity remains in short supply, with the main driver of consumer sentiment being “an easing in fears for the worst rather than a marked pick-up expectations for the best”.

“To set sentiment and spending on a solid rather than a shrunken trajectory, we think the survey emphasises the need for an ambitious and early fiscal stimulus," said Hughes.  "In the event of a supportive fiscal stimulus and the absence of a notably larger hit to employment and incomes than is now expected, substantial double-digit declines in consumer spending might be avoided.”

The full report is available here.