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Thursday 18 September 2014

Budget fears send consumer confidence plummeting

Charlie Weston Personal Finance Editor

Published 12/01/2013 | 05:00

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BUDGET blues sapped the confidence of consumers last month.

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Confidence nosedived to its lowest level in a year in December as worries about the impact of the Budget played on the minds of householders.

As well as hitting its lowest level in a year, the index that measures consumer sentiment recorded its sharpest fall in December in its 17-year history.

It crashed from 63.8 to 49.8, according to KBC Bank and the Economic and Social Research Institute (ESRI), compilers of the index.

The Government rattled householders with its sixth austerity Budget in little over four years last month. The Budget imposed €3.5bn in tax hikes and spending cuts on a long-suffering public.

KBC Bank economist Austin Hughes said the sharp fall showed how fragile consumer confidence was, but he insisted the plunge in the index overstated the deterioration in the mood of consumers.

He said the rapid decline in consumer confidence was at odds with consumer sentiment in the rest of the eurozone.

Consumers in Ireland were "jumpy" because of a sixth harsh Budget and uncertainty about their financial future.

"There is little doubt that most Irish consumers felt that the Budget would make them worse off and this prompted an outsized fall in sentiment," Mr Hughes said.

Cautious

Sentiment had also nosedived in December 2011 after the Government announced its Budget. However, that sharp drop was gradually reversed over the following months, with sentiment hitting a five-year high in August.

The index's authors expect a similar trend this year.

"We think the scale of the decline in the sentiment index hugely exaggerates the change in the circumstances of the average Irish consumer of late," Mr Hughes said.

The large fall was at odds with cautious optimism among Irish retailers after reporting their busiest Christmas period since the financial crisis began.

People may have gone on a shopping spree at Christmas knowing that they face into a difficult 2013. "In some cases, this may have been a last hurrah," the economist said.

Irish Independent

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