Shoppers likely to cut back spending

Consumer sentiment in Ireland is at its lowest in six years, and fewer than one in five people expect their financial situation to improve over the next 12 months, according to the latest consumer sentiment survey.

That is likely to hit spending in the crucial pre-Christmas period, making it difficult for the economy as a whole to show much improvement before the end of the year, says IIB Bank economist Mr Austin Hughes. The bank compiled the consumer sentiment index in association with the Economic and Social Research Institute (ESRI).

The index fell to 70.3 in September from 73.3 in August, dragged down particularly by consumer perception of current economic conditions which fell from 93.3 to 86.9.

"The fact that the weakening was concentrated in the current conditions component suggests that poorer economic conditions at home and abroad have really begun to hit the purchasing power of Irish consumers," said Mr Hughes, who blamed weaker income growth and stubbornly high inflation.

The rate of decline in the index has slowed, according to Mr David Duffy of the ESRI, but the figures are now lower than at any time since the data began back in February 1996.

For the first time, the number of people arguing that now is a bad time to make a major purchase (23 per cent) outnumbers those who thought the timing was right (22.8 per cent). At the peak of the boom, 42 per cent were in favour of the purchase of big ticket items.

The report sees this fall in confidence as a key element in its expectation of sluggish pre-Christmas sales.

"Clearly, the September sentiment data suggest the next few months will be difficult for the economy," the report states. "We will need a little more data to assess whether 2003 promises more of the same."