Consumer sentiment drops to four-year low

CONSUMER sentiment has dropped to its lowest level in almost four years, as concern about the housing market and the construction sector mounts.

The IIB Bank/ESRI consumer sentiment index fell to 74.7 in July, compared to a figure of 83.2 in June and 90.9 for July last year.

Chief economist with IIB Bank Austin Hughes said: “The July sentiment results suggest that a spate of gloomy forecasts for the property market and the broader Irish economy have made consumers much more nervous about economic activity.

“The fact that consumer sentiment is now at its lowest level in nearly four years and that the monthly drop in July was the largest since September 2005 suggests that consumers are increasingly focussed on downside risks to the Irish economy.”

But the downgrading in consumers’ assessment of the economic outlook will not herald an economic slump said Mr Hughes.

“Importantly, while consumers were downgrading their view of the macro economy in July, they were also feeling marginally more positive about their own household finances.

“So while consumers are increasingly cautious, their spending should remain reasonably healthy albeit more restrained than in the first half of 2007,” he said.

Both parts of the index fell last month with the index measuring how people feel about current economic conditions declining from 96.6 to 90.8, while the forward-looking index, which focuses on outlook for the coming months, fell to 63.9 from 74.1 in June.

A breakdown of the figures showed that 68% of those surveyed expected unemployment to increase over the next 12 months, while 52% take a negative view of the Irish economic outlook, against 14% who are positive.