Morning Equity Briefing
Market Comment
Consumer confidence edges back in August as Irish 10-year bond yields drift to 6%
Aidan Corcoran
The KBC/ESRI consumer sentiment index registered a fall in August, to 61.4 from 66.2 in July. Taking a three-month average in order to derive a stronger signal, the index fell to 65.2 from 66.5 in the three months to end-July. While the level is still consistent with a recovery in consumption and the wider economy, the fall comes on top of recent similar movements in indicators such as retail sales, the trade surplus and the Live Register, adding weight to the perceived moderation in the pace of recovery.
The fall in Irish consumer confidence comes against the backdrop of rising sentiment elsewhere: the American Conference Board consumer confidence index beat forecasts to post a three-point gain, rising to 53.5 in August from 51.0 in July, while the European Commission's economic sentiment indicator for the EU rose to 102.7, up 0.6. The fact that the Irish consumer bucked this trend suggests that domestic woes are behind the move, with the €25bn — give or take a few billion — Anglo bill a likely candidate.
Spreads on Irish bonds widened again, showing that investors are as concerned as consumers at the prospect of rising sovereign debt. Yields rose to over 6%, the highest in more than a year, before retreating to 5.98% at yesterday's close. Exchequer returns for August, showing an on-target consolidation of the underlying fiscal position, have done little to soothe fears but will help to ease spreads over the medium term.