CONSUMER confidence plunged last month with experts saying the Government must make clear the extent of pain that is on the way.
The KBC Ireland/ESRI consumer sentiment index plunged to 52.4 in September compared with 61.4 in August and 49.6 in September last year.
KBC chief economist Austin Hughes said the sharp fall in September isn’t surprising but underlines the extent to which consumers see recent events as “fundamentally altering the outlook for economic activity, employment and incomes”.
“The normally remote world of bond markets has become all too familiar to Irish consumers in the past month and these usually ‘unknown unknowables’ prompted an element of panic among Irish consumers about their future,” he said.
Mr Hughes said the real risk highlighted by these numbers is that consumers and businesses pull-back from spending and prompt a further drop in activity.
“There is now an acute awareness among consumers that more pain is coming. The key task for government is to convince consumers that the upcoming adjustment is manageable in the sense of both curing the public finances and not killing the Irish economy,” he said.
David Duffy of the ESRI said the decline in consumer sentiment is mainly due to a more negative perception by consumers of the outlook for the next 12 months.
“Consumers have become more concerned about the outlook for their finances, the economy and the labour market over the next year. Three out of four consumers expect unemployment to increase over the next 12 months,” he said.
The forward looking expectations index weakened to 37.9 from 52.1 in August, while the index of current conditions weakened to 73.8 from 75.3 in August.
Director of Retail Ireland Torlach Denihan said the fall in consumer confidence will only be reversed when the Government spells out in detail what lies ahead in terms of spending reductions, increased charges for public services and tax increases.
“The public is sitting on significant precautionary savings, but will not spend it until they have greater clarity about their future financial position. Retail sales will remain stalled until this happens,” he said.
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