Consumer sentiment was broadly stable in July, declining marginally as consumers remained cautious.

The KBC Bank Ireland/ESRI consumer sentiment index fell from 56.3 in June to 55.9 last month. That compares to a reading of 66.2 in July 2010.

July's moderate decline was attributed to the effect of an improvement in consumers' perception of their economic prospects. The survey showed the index of current economic conditions increased to 74.2 in July from 71.5 in June.

"The improvement in consumers' perceptions of the current environment reflects the view that July was a good time to purchase major items," said David Duffy, ESRI. "Historically this component improves in July, reflecting, at least in part, the summer sales."

The expectations index, however, fell to 43.6 in July, from 46.2 in June.

"It's not surprising that sentiment weakened in July," said Austin Hughes, KBC Ireland. "The Irish consumer was bombarded with bad news on many fronts. Some developments, such as the ECB interest rate increase, had fairly obvious negative implications for household spending power. Others, such as increased worries about a Greek default or a possible breach of the US debt ceiling may have seemed more remote in terms of their implications for the average Irish household.

"However, since the crisis began, Irish consumers have become sufficiently familiar with the signals emanating from global financial markets to know when something is likely to mean bad news for them."

Mr Hughes said although the mood of consumers is now somewhat better than in July 2008, when the index hit an all-time low of 39.6, it remains weak.