Fall in consumer sentiment reflects economic concern

Consumer sentiment fell last month, reflecting a loss of confidence in the Irish economy, according to the latest IIB Bank/ESRI index.

The index was 89.0 in June, lower than the previous two months, but it remains higher than the level of 83.1 recorded in March.

The decline reflects consumer concerns about the future economic outlook and fears that unemployment may increase, according to Mr David Duffy of the ESRI.

"Overall, 58.4 per cent of consumers expect unemployment to increase over the next 12 months, while only 14.4 per cent expect a fall in unemployment," he said.

The index, which is based on a representative national survey of a minimum of 1,100 completed questionnaires, reached 91.7 in April and 92.4 in May.

Recent concerns about deficits in the public finances may also have contributed to deflated consumer confidence last month.

Mr Austin Hughes of IIB Bank said: "The June outturn may also be due to growing concerns about the outlook for the public finances. During late May and early June, the risks of a return to significant deficits received a lot of attention.

"Emerging overruns in public spending and fears of possible tax hikes in the future could have hurt sentiment both in terms of households' assessments of their own future financial situation and the outlook for the economy as a whole."

There is also evidence that consumers may be building up savings in preparation for a "rainy day", according to the report.

Overall, consumer sentiment has been improving since last October when it fell to a low of 76.3.