Consumer sentiment weakened considerably in February as job loss fears grew and as consumers kept their money in their pockets after the January sales ended.
The IIB/ESRI consumer sentiment index fell back to 63.5 from 67 in January.
Several factors - both domestic and international - had been expected to affect consumer confidence in February, IIB Bank said. Increased fears over the health of the world economy, especially the US economy, together with turmoil in financial markets and a surge in food and energy prices, caused concern for consumers.
But the main driver for the worsening in sentiment was a sharp deterioration in job market prospects, the bank noted. It said that news of several companies shedding jobs was the dominant influence on consumers in February, with redundancies announced in Arnotts, Allergan, Jacob Fruitfield, Grove Turkeys and several other companies around the country.
'Fears of significant cuts at several other companies and nervousness about employment prospects right across the construction sector also added to consumers anxieties about the job market,' commented IIB Bank's chief economist Austin Hughes.
Consumers' perception of the buying climate also weakened in February, as normally happens after the end of the January sales. Austin Hughes says that, however, the drop in this element of the index was the largest February decline since 2005. He said this hints at a more generalised caution from Irish households.
Consumers were also more negative about the trend in their household finances in the past 12 months, perhaps due to sharp increases in food and energy prices.
However, the index also shows that consumers were slightly less pessimistic about the outcome for their personal finances in the year ahead with the chance of an interest rate cut boosting confidence.
The IIB economist says that Irish consumers may be bracing themselves for the very negative news flow on the economy. Nearly two out of three consumers now expect the economy to weaken in 2008, compared to just one in eight who now expect it to improve.
