Irish consumer sentiment tumbled in September, according to the latest IIB/ESRI Consumer Sentiment index today. The index fell from 91 in August to 80.5 last month - its lowest level since December 2003. The scale of the decline is also the largest monthly fall since July 2002.
Last month's sharp drop in consumer sentiment followed two smaller declines in August and July - the first three-month sequence of falls in sentiment since the middle of 2003. IIB Bank said the upturn in the economy seems to have failed to live up to expectations.
The most pronounced weakening in the index related to consumers' assessment of Irish economic prospects in the coming year with only one in seven expecting the general economic situation to improve with one in two expecting a deterioration. This was the weakest outlook in two years.
Survey responses relating to employment were also sharply weaker in September, with one in two consumers expecting unemployment to rise in the next 12 months while one in five expect a decline.
Consumers also downgraded their assessment of their own financial situations in the year ahead. The number expecting an improvement in their household finances remained constant at a low 17.5% of survey responses. But the proportion of consumers expecting a deterioration jumped to 30% - the highest level since October 2003.
The bank says that last month's decline was much greater than that seen in most other European countries and was more in line with consumer sentiment declines in the US.
'While the US consumer had to handle the fall-out from the devastation wrought by Hurricane Katrina, Irish consumers had to deal with a number of important domestic economic storms,' commented Austin Hughes, IIB Bank's Chief Economist.
'Alongside the sharp increase in energy costs, a spate of high-profile job loss announcements and the continuing fall-out from 'Rip-Off Republic' combined to weight on sentiment,' he said.
The economist said that Irish consumers respond more to bad news than good news on employment because they fell the increased risk of lay-off is far more important than the persistence of a solid macro jobs market.
He said that it would not be surprising to see some modest 'bounce' in next month's results, particularly as oil prices have softened somewhat in the past week or so. However, he added that it was not clear what could prompt the emergence of a palpable 'feel good' factor that would drive consumer confidence higher in the short term.
