Consumer sentiment falls amid fears for jobs

CONSUMER SENTIMENT dipped in February as the post-Christmas sales came to an end and worries about unemployment intensified. According to the KBC Ireland/ESRI Consumer Sentiment Index, consumer confidence dipped to 44.2 from 49.6 in January.

The 50 mark separates growth from contraction.

Austin Hughes, chief economist of KBC Ireland, said the arrival of Christmas credit card bills and the end of the new year sales contributed to the decline in confidence.

This effect seems to have been “particularly marked this year”, suggesting some consumers are reining in spending after a final splurge during Christmas.

A second factor was the worsening economic outlook for the country, with Taoiseach Brian Cowen warning of a significant drop in living standards.

“It could also be that a much poorer outlook for the Irish public finances is forcing consumers to contemplate an even greater degree of belt-tightening than they had expected,” Mr Hughes said, noting rising consumer concerns about unemployment.

Although the February reading is above the record low of 39.6 in July 2008, significant job losses were announced during the survey period.

Companies reducing staff include Superquinn, SR Technics, Ulster Bank, Ericsson, Glanbia, Ryanair and Bus Éireann.

Mr Hughes said the scale of job losses was probably the worst in the 13-year history of the survey.

Another contributor to the decline was that the European Central Bank did not cut interest rates in February, following four consecutive monthly reductions, while oil prices had also stopped falling over the period.

On a more positive note, Mr Hughes said the decline in February was relatively modest compared to the decline in US consumer confidence, which fell from 37.4 to 25 in January.

“In view of the scale of worries about jobs and the hit to spending power from the pension levy and the growing prospect of significant tax increases, the February survey details may suggest consumers are more realistic and resilient than is sometimes suggested,” Mr Hughes said.

The measure of how consumers view current economic conditions fell to 75.6 in February from 85.7 in January, according to the survey, taken in the first two weeks of the month and based on more than 800 responses.

The index of consumer expectations fell to 23.1 from 25.3.