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Spike in Northern Ireland consumer confidence despite inflation increase

By Margaret Canning

Consumer confidence has rebounded in Northern Ireland as the public appears to come to terms with Brexit, according to a new survey.

Danske Bank's measure of consumer confidence had jumped by nine points between the end of 2016 and the first quarter of 2017, the bank said.

Members of the public were more positive about what their financial position might be in the next 12 months, and about how much they would be able to spend on high-value items.

The confidence comes despite inflation reaching 2.3% - and it's expected to climb even higher when April's rate is announced today.

Danske Bank economist Conor Lambe said: "Despite the fact that inflation is rising and exerting some pressure on households' spending power, consumer confidence surprised on the upside in the first quarter of 2017.

"Our index shows that consumer confidence in Northern Ireland is at its highest level since the third quarter of 2015.

"This strong bounce back could, in part, be due to consumers now having more clarity about the UK Government's planned approach to the Brexit negotiations, and that the UK and EU have both shown willingness to find a solution to the border issue.

"The rise in confidence could also be interpreted as a sign that, while economic growth is expected to slow, consumers feel confident that the short-term impact of the referendum on the economy is not going to be as severe as first thought."

But Mr Lambe said he believed the fall in the value of sterling of about 12% since the referendum could be hitting holiday plans as holidaymakers shun Eurozone destinations.

Just over one-third of respondents were planning to go abroad, while 7% were planning to visit the Republic.

Mr Lambe added: "Taken together, 59% of consumers are either not planning on going on holiday, hope to holiday domestically or don't know where they will go, and the weakness of the pound could be feeding into those decisions."

Meanwhile, figures from research company Springboard and the Northern Ireland Retail Consortium have said footfall through the province's retail destinations rose by 0.1% during April - the first monthly increase in 2017 so far.

April's performance was well above the three-month average of -2.7% and the 12 month average of -0.4%.

The Consumer Price Index (CPI) measure of inflation is expected to reach 2.6% in April - the highest rate since September 2013 - when official figures are released today.

It would mean the squeeze on consumer spending continued last month following a temporary respite in February and March when CPI paused at 2.3%.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said CPI could even reach 2.7%, with upward pressure coming from the airline industry.

Airline prices are expected to have soared last month because the Easter holidays fell on April 16 this year, whereas they fell on March 27 in 2016.

The Bank of England said in its latest inflation report that CPI would peak at 3% later this year as the pound's slump since the Brexit vote causes price tags to tick higher.

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