Decline in consumer sentiment reverses gains

Consumer confidence fell in November, marking a change in recent sentiment, according to the latest figures from the Economic and Social Research Institute (ESRI) and IIB Bank.

The ESRI/IIB Bank consumer sentiment index dropped to 92.6 from 99.6 in October, reversing the gains of the previous two months.

The surprise decline was driven by consumers' concerns about the outlook for the economy, the labour market and their personal financial situation, according to Mr David Duffy of the ESRI.

Confidence in the current environment also fell.

The drop in sentiment was described as unexpected by IIB Bank economist Mr Austin Hughes, who said it was probably a correction rather than a reversal to an improving trend in relation to consumer sentiment and the overall Irish economy.

The index has been on a general upward curve for more than a year. However, Mr Hughes added that the weaker data for November suggested that the economic upswing might not be as strong as had been thought.

"Clearly consumers are still vulnerable to bad news on the economy, be that in the form of higher energy costs or worries about the direction of taxation."

The November decline indicated that there was a "two-way" risk in relation to today's Budget, he said.

"We are used to hearing about the risks to the economic outlook that might follow an excessively generous Budget. The November Consumer Sentiment reading hints that an excessively cautious package could leave confidence and spending on a disappointing path in early 2005."