Consumer sentiment weakened in August, hitting a six-month low as consumers remained cautious and perceptions of the buying climate became more negative.
The ongoing uncertainty over the cost of the bank bailout, the rising cost of borrowing for the State, high unemployment and anticipated cutbacks in public spending weighed on the KBC Ireland/ESRI Consumer Sentiment Index, which fell to 61.4 last month, compared to 66.2 in July.
However, it remained above the 48.7 recorded in August last year, and the all-time low of 39.6 in July 2008.
KBC Ireland’s chief economist Austin Hughes said the data indicated renewed nervousness among Irish consumers, with a sharp pullback in planned spending driving the decline.
“Because this is the most volatile element of the survey, it may be that last month’s drop was exaggerated. However, it is clear that confidence remains very fragile and increased uncertainty is likely to make Irish consumers more cautious, implying downside risks to spending prospects in the months ahead,” he said.
The fall in Irish consumer sentiment is in contrast with other countries, where readings have improved.
“The pull back in the buying climate probably owes something to the end of the summer sales as well as holiday spending and back to school bills,” said Mr Hughes. “However, weaker sentiment probably also reflects a broader sense of unease that owes much to increased nervousness about the banking and budgetary outlook.”
The index measuring expectations weakened to 52.1 from 53.1 in July, dragged down by consumers’ more negative view for the economy. The index of current conditions, which includes perceptions of the buying climate, fell to 75.3 last month from 85.7 in July.
The ESRI’s David Duffy said decline in the overall index may reflect a post-summer sales effect.
“In general consumers remain cautious,” he said. “Nearly half of consumers expect no improvement in the economy over the next 12 months.”
