Consumers too nervous to spend

NERVOUSNESS about the banking and budgetary outlook has played a part in an unwillingness of consumers to part with their cash.

Consumer sentiment weakened significantly last month, a contrast to improved confidence readings in other countries.

The fall in confidence in Ireland was also attributed to the end of the summer sales, holiday spending and back to school bills.

The KBC Ireland/ESRI consumer sentiment index weakened in August to 61.4, compared with 66.2 in July. However, the figure is still up from 48.7 in August last year and remains well above the all-time low in July 2008 of 39.6.

KBC economist Austin Hughes said the broad message from the August sentiment data is one of renewed nervousness among Irish consumers. “The main driver was a sharp pullback in spending intentions... 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.”

The forward looking expectations index weakened to 52.1 from 53.1 in July, on the back of a more negative view of the outlook by consumers for the economy. Nearly half of consumers expect no improvement in the economy over the next 12 months.

David Duffy of the ESRI said: “The decline is mainly due to a more negative perception by consumers of the current buying climate. This may well reflect a post-summer sales effect.”

Figures showed that in the US, consumer sentiment partly reversed the poorer trend reported there through the summer months.

Also in Europe, notably stronger economic growth contributed to an improvement in consumer confidence.

Mr Hughes said: “It would seem that the weakness seen in Irish consumer sentiment in August largely reflected domestic economic concerns,” he said.