In a month of extraordinary turbulence in global financial markets, Irish consumer sentiment weakened in October. The latest figures show that the KBC/ESRI consumer sentiment index fell to 42 from 45 in September.
But the three point drop was relatively modest compared to sharp sentiment declines in many other countries and the drop was smaller than had been expected.
The weakening in Irish consumer sentiment in October followed two months of improvement and leaves the index just above the all time low of 39.6 recorded in July. However, it compares with a reading of 71.8 in October 2007 and is well below the value of 67 recorded at the start of 2008.
KBC Ireland's Austin Hughes said the most notable aspect of the October index is that Irish consumer sentiment worsened far less that similar indicators in many other countries.
He said that around the world confidence was sent reeling by increased turmoil in the financial markets and a much poorer outlook for economic activity and employment. Irish consumers also had to deal with the prospect of a very tough Budget last month.
The economist says that a couple of factors cushioned the blow to consumer sentiment last month. Irish consumers had been bracing themselves for tougher economic conditions for some time, and falling oil prices and lower borrowing costs also implied less of a strain on household finances in the coming year.
'This is an important offset to the torrent of gloomy news and may limit the weakness in consumer spending in the year ahead,' he added.
The ESRI's David Duffy said that while consumers were more negative across a range of components the decline in sentiment is mainly due to consumers becoming more worried about the outlook for their household finances over the next 12 months.
KCB Ireland predicts that consumer sentiment will fall further next month. It points out that the October survey was completed just before Finance Minister Brian Lenihan introduced his Budget 2009.
'Widespread concerns about a number of Budget measures and the prospect of further tough budgets in coming years can be expected to have made Irish consumers a good deal more gloomy,' it said.
