IRISH CONSUMERS WERE less confident about their financial prospects last month than they were in September.
The latest KBC Ireland/ESRI consumer sentiment survey shows that shows a drop from a near eight year high of 92.8 in September to 85.5 in October.
Austin Hughes, Chief Economist with KBC Bank Ireland, said the drop in consumer sentiment is “as substantial as it is surprising”
So, why the dip? In short, KBC and ESRI can’t answer that – but they do have some ideas.
Hughes said that concern about water charges and increased mortgage deposit limits could have both played a role.
The October reading shows 39% of consumers think their personal finances will worsen in the next twelve months compared to 19% that expect an improvement. It can’t be excluded that the index is capturing some of the increased concerns of late in relation to water charges and possibly even the Central Bank’s proposals in relation to mortgage lending.
“For some consumers, this implies less spending power and a longer wait for house purchase while it may also add to uncertainty about the near term outlook for the Irish property market.”
The survey was largely completed before the Budget on October 14th. However, KBC said that “in marked contrast to recent years, most pre-Budget commentary was not warning of impending pain”. Due to this, it “shouldn’t have weighed on sentiment last month”.
The bank noted that the setback might just be a “blip”, adding that the results are are “consistent with many consumers’ experience of a recovery that they hear and read to be very healthy but one which they are not feeling in their personal finances”.
The drop in Irish consumer sentiment in October is the second largest monthly decline in the past 22 months. KBC said that the decline is “at odds with other economies” as corresponding US figures rose to their strongest level since March 2007.
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