Consumer sentiment at 17-month low
Published 02/11/2010 | 14:05
Irish consumer confidence fell in October to its lowest level in 17 months as the mounting cost of bailing out banks and government spending cuts created a "fear factor" among households.
The consumer sentiment index declined to 48.1 from 52.4 in September, KBC Ireland and the Economic & Social Research Institute (ESRI) in Dublin said today in an e-mailed statement.
That’s a fourth straight decline and leaves the index at its lowest since May 2009. A measure of households’ expectations fell to the lowest in 14 months.
The Government may have to spend €50bn -- about one-third of gross domestic product -- to save lenders including Anglo Irish Bank.
Confidence may drop further this month after Finance Minister Brian Lenihan said he needs savings of €15bn through higher taxes and spending cuts over the next four years to reduce the budget deficit
“A range of bad news on the economic outlook, on banking costs and on budget prospects have prompted a fear factor among consumers,” Austin Hughes, chief economist at KBC Ireland, said in the statement.
They “realise these developments will seriously damage their spending power in 2011.”
Lenihan’s €15bn plan is intended to reduce the deficit to the European Union limit of 3pc of GDP in 2014 from about 12pc this year and convince investors the Government won’t need external aid.
Irish 10-year bonds fell today, widening the yield spread against German bunds, the euro region’s benchmark, by 13 basis points to 475 basis points, the most since Bloomberg began collecting the data in 1991.
KBC’s gauge of consumer expectations weakened to 28.8 last month from 37.9 in September, the lowest since August 2009.
The measure of how consumers view current economic conditions rose to 76.7 from 73.8. There was also a “marginal improvement” in the outlook for employment, KBC said.
“The future for most Irish consumers will be significantly shaped by the looming four-year fiscal plan,” Hughes said.
“These developments could markedly alter the impression suggested by the October sentiment survey that the Irish consumer is down but not entirely out.”