A spate of high-profile job losses and increasing unease about job security dragged consumer confidence down in March to its lowest level since October 2005.
The IIB/ESRI Consumer Sentiment Index fell to 92.3 from 102.9 in February.
Mallow Sugar Plant, Wyeth Medica, NEC, Magee Clothing and Saehan Media all announced job cuts in March.
However IIB noted that consumers tend to overreact to job losses compared to job announcements and that previous experience suggests that sentiment should bounce back in April .
As well as the redundancies, IIB chief economist Austin Hughes cited continuing concerns about the impact of immigration on the Irish jobs market and the rise in interest rates as factors behind the surprising slump.
"Although the Irish economy is performing exceptionally well, its changing structure may be causing difficulties for many consumers," he said
"It should be emphasised that many other economies are adapting to this change far less successfully than Ireland as the current difficulties in France testify," he added.
"However, the recent riots in France underline a concern that may also be hinted at in Irish consumer sentiment data. Even in a very healthy Irish economy, job security has declined," he said.