Sharp fall in consumer sentiment recorded in September

Consumer sentiment fell nine points in September, the largest monthly drop in over four years.

The sharp slide comes amid consumer worry over upcoming budget cuts and the cost of the bank bailout.

The overall KBC Ireland/ESRI Consumer Sentiment Index declined in September to 52.4 points, down from a figure of 61.4 in August, and a value of 49.6 in September 2009.

The September reading remains above the all time low in July 2008 of 39.6.

Sentiment weakness is far more pronounced in Ireland than other countries like the UK and the US.

Chief Economist with KBC Austin Hughes said there is a danger panic may be taking hold.

“The sharp fall in Irish consumer sentiment in September isn’t entirely surprising but it does underline the extent to which consumers see recent events as fundamentally altering the outlook for economic activity, employment and incomes," Mr Hughes said..

"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.”

“The real risk highlighted by these numbers is that Irish consumers and businesses pull-back from spending and prompt a further downleg in activity," Mr Hughes added.

"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.”

Retail Ireland, the IBEC group that represents the retail sector, today said that the figures confirm why the sector remains in the doldrums.

"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, " Retail Ireland Director Torlach Denihan said.

"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."