Consumer sentiment holds steady

A record 97 per cent of consumers expect unemployment to rise over the next 12 months.

The KBC Ireland/ESRI Consumer Sentiment Index reflects concern over job security and has been negative since early 2007, roughly a year before unemployment started to increase rapidly in measures by the Central Statistics Office.

The measure of consumer sentiment was almost unchanged in March, dipping from 44.2 to 44.1.

Austin Hughes, chief economist of KBC Ireland, said given the job losses last month and the planning of the supplementary Budget it would not have been surprising if the index had slumped.

He said the survey - which was taken during the first two weeks of March - indicated an "encouraging capacity among Irish consumers to detect some favourable developments during the survey period”.

Irish consumers had been gloomy for a very long time, he said, and had been on an “increasingly pessimistic path for a full three years”.

The deterioration in the public finances during March didn’t radically change this gloomy outlook. Mr Hughes said this may reflect the fact that to the average consumer “it may not matter hugely whether Irish GNP contracts by 5 per cent or 8 per cent this year,” Mr Hughes said.

“The important reality for most consumers is that they are braced for a substantial deterioration in living standards in the coming 12 months”.

The succession of interest rate cuts by the ECB since last October which led to rates falling from 4.25 per cent to 1.5 per cent during the survey period appears to be offering support to consumer sentiment, particularly as this was feeding through to lower prices, according to the report.

The index of consumer expectations, which measures expectations of future financial health, dropped to 22.5, from 23.1 in February.