Consumer sentiment weakened slightly in July, as a European Central Bank interest rate rise and weakening global economy hit confidence.
The July reading of the KBC Bank Ireland/ESRI Consumer Sentiment Index was marginally lower at 55.9 last month, down from a value of 56.3 in June, and 66.2 in July 2010.
This decline comes after recent euro zone data indicated that sentiment in the area had been dented by the sovereign debt crisis, while US consumer spending unexpectedly dropped for the first time in almost two years in June.
Austin Hughes of KBC Ireland said it wasn't surprising that sentiment weakened in July, as the Irish consumer was "bombarded" with bad news on several fronts. In July, the ECB raised interest rates 25 basis points to 1.5 per cent, which had obvious negative implications for household spending power.
Mr Hughes noted that although the heightened concerns about a Greek default, or a possible breach of the US debt ceiling, may have seemed "remote" to Irish householders, consumers have become sufficiently familiar with financial market signals to know "when something is likely to mean bad news for them".
He noted that while the mood of consumers remains off the lows hit in July 2008, when the index reading dropped to 39.6, it remains fairly weak.
"A threatening combination of cash flow and confidence problems suggests the risk of continuing weakness in consumer spending," he said.
David Duffy of the ESRI said that the decline in the July reading of the overall index was small, mainly due to an improved perception of current conditions. However, the forward-looking 'expectations' sub-index fell to 43.6, from 46.2 in June.
