Oil and rate falls boost consumer confidence

Sharp falls in oil prices and interest rates have given a slight boost to consumer confidence, a survey revealed today.

It is the third increase in four months but economists warned people remained worried about the credit crunch.

Pessimism about employment is at its highest level while four out of five people believe the economy will worsen next year, according to KBC Bank and the Economic and Social Research Institute.

And separate figures from the Central Bank reveal growth in mortgage lending has slumped to a 22-year low.

David Duffy, of the ESRI think-tank, said although consumers were marginally less gloomy, they remained nervous.

“The underlying message from the analysis is that consumers remain cautious in the present circumstances,” he said.

The KBC Bank/ESRI index rose 2.8 points from 42 in October to 44.8 in November - the third rise in the past four months.

But economists warned the upbeat findings did not indicate any major turnaround in confidence but hinted at higher than expected spending next year.

Most people remain fearful about their jobs and anxious about household finances.

Just 1% of people feel the economy will improve next year, with 91% believing unemployment will increase – the highest figure in the survey’s 13-year history.

But despite the downturn in global finances consumers are a little less negative about their own financial situation.

Between the October and November surveys oil prices dropped from just under 79 dollars to 57 dollars per barrel.

The European Central Bank also indicated interest rates would fall in December for an unprecedented third month in a row.

Austin Hughes of KBC Bank said although the findings show Irish consumers are worried the fall in fuel bills and interest rates have not gone unnoticed.

“Although the improvement in sentiment in November is marginal, nonetheless it is a welcome positive surprise,” he said.

“It suggests that although consumers are down they are not completely out.

“The possibility of falling consumer prices in 2009 means household spending power will stretch further reversing the painful impact of a surging cost of living in recent years.”

The survey stated that while Christmas spending may be cautious, it will not be cancelled.

Meanwhile, figures from the Central Bank reveal a dramatic slump in mortgage lending in October.

The annual rate of growth fell to 7.6% – the lowest figure in 22 years.

The amount of money lent for mortgages rose by just €26m in the month, compared with an average monthly increase of over €700m in the previous three months.