Consumer sentiment slumped in October on sharply increased concerns about the potential impact on household finances and jobs of a renewed surge in Covid-19 cases and the prospect of related restrictions on economic activity.

The KBC Bank Ireland consumer sentiment index fell to 52.6 in October from 60.7 in September and now stands at the lowest level since May. 

KBC noted that the monthly drop of 8.1 points in October was the second largest in the past year, and was broadly similar to the initial reaction to the pandemic in the March survey when the index dropped by 7.9 points.

But it was better than the tumble of 34.7 points in the April survey in the wake of the first Covid-19 lockdown.

KBC Bank Ireland said the current level of the sentiment survey pointed to a very nervous Irish consumer and all five elements of its sentiment survey were weaker in October than in September. 

It said the largest weakening was seen in consumers' expectations for their financial circumstances over the next 12 months.

This was due to increased nervousness about the lasting impact of the coronavirus and related restrictions on economic activity on income prospects.

KBC Bank said that those surveyed after Budget 2021 were marginally less negative about the outlook for household finances than those who responded before the Budget. 

"As there was a progressive deterioration in health-related news through the survey period, this might suggest some modest positive impact on consumer confidence from the measures announced in Budget 2021," it added.  

It also said that one small positive in today's survey was the relatively limited downgrade of household current finances and spending plans that suggests "fear rather than fatalism is gripping Irish consumers at present".