Consumer sentiment falls again

Consumer sentiment has hit its lowest level in 17 months, according to the latest KBC Bank/ESRI index.

The index declined in October to 48.1, the fourth consecutive fall as people worry about the forthcoming Budget.

This compares to a figure of 52.4 in September, and a value of 54.2 in September 2009. The October reading remains above the all time low in July 2008 of 39.6.

Nearly two thirds of consumers expect their household finances to worsen over the next 12 months, according to the survey.

“It isn’t surprising that Irish consumer sentiment weakened in October," said KBC Chief Economist Austin Hughes.

"A range of bad news on the economic outlook, on banking costs and on budget prospects have prompted a ‘fear factor’ among consumers who realise these developments will seriously damage their spending power in 2011.

"The key question is whether consumers have now fully priced in all the bad news. Their reaction to the four year fiscal plan and Budget 2011 will tell us whether the reality is more or less painful than the fears Irish consumers feel at present.”

There was some good news however as the decline in October was the smallest since July.

"While the general tone of the October sentiment survey was negative, there were a couple of surprising positive aspects," Mr Hughes added.

He said consumers were "marginally less negative" about the outlook for jobs, which perhaps reflected the drop in the live register and the year on year decline in redundancies as well as some increase in new job announcements recently.

"Even more surprising was an improvement in the buying climate," Mr Hughes said.

"This could suggest consumer spending might be more resilient than is currently feared."