Consumer sentiment falls sharply

Consumer sentiment fell in September, showing the largest monthly decline in four and a half years.

Consumer sentiment fell in September, showing the largest monthly decline in four and a half years.

The KBC Ireland/ESRI Consumer Sentiment Index declined to 52.4, the lowest level in a year. This compares to 61.4 in August and an all-time low of 39.6 recorded in July 2008.

“The fall in Irish consumer sentiment in September was on a notably greater scale than seen in comparable US or UK confidence indicators and contrasts even more markedly with the broad stability seen in consumer confidence across the euro zone,” the report said.

“The Irish consumer sentiment data showed a much larger decline in September than was evident elsewhere pointing to the emergence of some uniquely Irish concerns in the past month or so.”

READ MORE

Consumers have become increasingly worried about the broad economic outlook and how it will impact household spending power.

“Consumers have become more concerned about the outlook for their finances, the economy and the labour market over the next year. Three out of four consumers expect unemployment to increase over the next 12 months,” the ESRI’s David Duffy said.

The expectations index weakened to 37.9 last month, from 52.1 recorded in August.

The report said there was a significant deterioration in households assessment of their own financial situation in the coming 12 months, with domestic factors driving the “substantial” downgrading of the Irish economic outlook by consumers in the past month.

The index that measures current conditions, which includes consumer’s perceptions of the buying climate, fell to 73.8 from 75.3 in August, possibly due to the effect of the end of the summer sales.

KBC Ireland’s Austin Hughes said the sharp fall in consumer sentiment wasn’t “entirely surprising”, but underlined how consumers viewed recent events as altering the outlook for economic activity, employment and incomes.

“The normally remote world of bond markets has become all too familiar to Irish consumers in the past month and these usually ‘unknown unknowables’ prompted an element of panic among Irish consumers about their future,” he said.

“The real risk highlighted by these numbers is that Irish consumers and businesses pull-back from spending and prompt a further downleg in activity. There is now an acute awareness among consumers that more pain is coming. The key task for government is to convince consumers that the upcoming adjustment is manageable in the sense of both curing the public finances and not killing the Irish economy.”

Industry group Retail Ireland said the decline would only be reversed when the Government outlined the planned spending reductions, increased charges for public services and tax increases.

“The public is sitting on significant precautionary savings, but will not spend it until they have greater clarity about their future financial position,” said director Torlach Denihan. “Retail sales will remain stalled until this happens."