Index dip ominous news for economy

CONSUMER sentiment fell in August for the third month in a row raising fears about a further loss of momentum in the Irish economy.

This further dip in the index is its lowest point ever. Prior to August the last low point was in October when the index fell to 76.3. This latest sharp fall in consumer confidence is contained in the IIB Bank/ESRI Consumer Sentiment index.

IIB’s chief economist Austin Hughes, said the index was ominous for the economy. It shows the bad new on job losses in Ireland and the increasing concern about the national finances is having a direct impact.

“This is good news in a sense because it means the consumer is cutting back and not rushing out to borrow to make up for loss of income being precipitated by the sharp down turn in the economy.”

Mr Hughes said a dip in growth from 10% to 3% takes some managing and experience elsewhere shows consumers have increased borrowing to make up any shortfall in their living standards.

This latest measure of how the consumer views the economy shows they are acting “responsibly” and that, at least, is good news, he said.

Mr Hughes said the weakness in the outlook reflects the increasing reality all is not well in the economy. He said the figures suggest household spending is struggling to find any significant degree of forward momentum at present.

“Much the same is true of the broader Irish economic situation. That implies the likelihood of sluggish growth at best in the final stages of the year.”

August’s fall brings the index to its lowest recorded level since it was established in 1996. IIB says over the past few months, it had become clearer that last year’s growth slowdown would not be followed by a quick return to boom conditions.

Mr Hughes said continuing concerns about the international economic environment, the impact of public spending cuts and proposed increases for public service charges have led to a further deterioration in consumer optimism.