97% expect to see jobless rate rise

A RECORD 97 per cent of consumers expect unemployment to rise over the next 12 months, according to the KBC Ireland/ESRI Consumer Sentiment Index.

The survey reflects concerns over job security and has been negative since early 2007, roughly a year before unemployment started to increase rapidly.

The monthly measure of consumer sentiment was almost unchanged in March, dipping from 44.2 to 44.1, and near historic lows.

Austin Hughes, chief economist at KBC Ireland, said following job losses announced last month, it would not have been surprising if consumer confidence dropped.

During the first two weeks of March – when the survey was conducted – KPMG, Bausch Lomb and meat-processing firm Dunbia announced hundreds of layoffs.

The fact that sentiment did not fall significantly suggests Irish consumers had prepared themselves for bad news, according to Mr Hughes.

The March index indicated an encouraging “capacity among Irish consumers to detect some favourable developments during the survey period”.

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

The deterioration in the public finances during March didn’t radically change this gloomy outlook either, he added.

This may be because, to the average consumer, “it may not matter hugely whether Irish GNP contracts by 5 per cent or 8 per cent this year.

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

A succession of interest rate cuts by the ECB since last October appears to be supporting consumer sentiment, particularly through lower mortgage repayments, while electricity prices have also fallen.

David Duffy, economist at the ESRI, said that while sentiment was stable last month, it remained “close to its lowest levels, suggesting that consumers remain cautious” and were worried about the impact of the economic downturn on their household finances.

The consumer index is composed of two sub-indices; one measuring reaction to present economic conditions and the other on how consumers view their prospects in 12 months.