Consumer confidence plunges amid employment and tax hike worries

A MEASURE of confidence among consumers plunged to a third of its highest ever level last month.

Worries about employment and an increase in taxes sent the index dropping to 44.1 in March. Its highest ever level was reached in January 2000 when it hit 130.9.

In March last year the KBC/Economic and Social Research Institute (ESRI) index was 63.3.

Last month’s reading was “not quite as poor as might have been feared”, said KBC chief economist Austin Hughes.

“A steady reading in March is a very encouraging result given an array of job losses and the announcement of an emergency budget during the survey period.

“This probably reflects the fact that Irish consumers are already very gloomy but it also seems clear that lower interest rates and falling prices are helping sentiment,” he said.

Mr Hughes also said Irish consumers have long-prepared themselves for the prospect of tougher economic conditions.

He said consumers appear to be responding positively to favourable developments such as lower interest rates and more widespread reductions in prices.

The index fell to a record low of 39.6 in July and the March reading compares with an average of 96.

The measure of how consumers view economic conditions rose to 76.2 in March from 75.6 in February, according to the survey, which was based on almost 800 responses. The index of consumer expectations declined to 22.5 from 23.1.

Mr Hughes said Irish consumers have braced themselves for a “good deal of bad news”.

“If this week’s budget makes the outlook even bleaker, confidence will take a further hit. However the details of the March sentiment survey suggest that if consumers see a credible roadmap out of the current difficulties even if this entails significant pain, confidence would be helped rather than hurt,” he said.

The index showed consumers were particularly gloomy about the jobs outlook.

A record 97% expect unemployment to rise further in the next 12 months, which is not surprising according to Mr Hughes.

“These results primarily reflect the extent of concern about job security among consumers. Viewed in this light, recent readings indicate deep-rooted and understandable fears about the risk of layoff,” he said.

There was also an improvement in the buying climate in the survey but Mr Hughes said this element can be extremely volatile.

“So, it would be foolhardy to suggest that this signals an improvement in the spending environment,” he said.


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