Consumer confidence dips in August

Irish consumer confidence dipped last as month as job losses at a number multinational firms heightened fears over unemployment, according to the latest KBC/ESRI survey.

The index fell to 48.7 from 49.5 in July, although the report notes the decline was relatively small and that confidence had remained relatively stable over the last three months, albeit at low levels.

The three-month moving average rose to 50.5 in August from 49.5 in July.

Austin Hughes, chief economist with KBC Ireland, said the report showed Irish consumers remained “extremely nervous” and said the reading for last month had to be seen in the context of a 13-year average of 93.4.

He said job losses at Element Six and Intel last month, coupled with proposals to reduce the size of the public service in the Colm McCarthy-led Review Body on Public Spending, had increased fears of job losses.

According to the survey, 93 per cent of consumers expect unemployment to continue to rise.

One striking finding was that the spending climate improved last month despite the background of predominately negative economic news.

Mr Hughes suggested that price discounting by retailers may have played a role and said this may indicate that the collapse in consumer spending earlier this year may be stabilising.

There was only a marginal drop in sentiment towards the country’s economic outlook with Mr Hughes saying this may be because consumers had prepared themselves for bad news and due signs of recovery in the global economy.

‘It is slightly surprising that we didn’t see a much sharper deterioration in August given significant redundancies, major cutbacks in spending proposed by an Bord Snip and controversy about NAMA”.

“It may be that consumers had already braced themselves for this sort of bad news. It could also be that they are keen to see some plan of action even if it isn’t perfect and of course they may be hoping that an improvement in other countries will limit the downside for Ireland,” he said.

The measure of how consumers view economic conditions rose marginally to 78.6 this month from 77.6 in July, according to the survey, which was taken in the first two weeks of August and is based on over 800 responses.

The index of consumer expectations fell to 28.6 from 30.6 in July, mainly because of negativity around employment prospects.