Nervous consumers in no mood to splash cash
CONSUMERS are becoming more nervous about spending money as back-to-school bills and the growing cost of bailing out the banks contributed to a gloomier economic mood.
A new poll showed consumer sentiment weakened again during August and is at its lowest level in six months, with nearly half of those surveyed expecting no pick-up in the economy next year.
This led to a sharp deterioration in consumer mood as they reined in their spending -- in contrast with other countries where people were more confident about the future, the KBC Bank/ESRI Consumer Sentiment Index found.
"It is clear that confidence remains very fragile and increased uncertainty is likely to make Irish consumers more cautious," said KBC Ireland economist Austin Hughes.
Consumers may have retreated from major purchases as summer sales ended and back-to-school bills loomed large, while holiday bills may have made a big dent in already stretched household budgets, he said.
However, another factor may have been the mounting concerns about the Government's budgetary strategy and bank bailouts which attracted a lot of negative attention.
"Such concerns would have called into question the wisdom of committing to major purchases," said Mr Hughes.
Surprisingly, the sentiment towards jobs improved marginally compared to July, probably helped by a number of new job announcements, even though most people still expect unemployment to rise further in the next 12 months.
Overall, consumer sentiment dipped to 61.4, down from 66.2 in July, but up from 48.7 a year ago and well above the all-time low of 39.6 in July 2008.
The return of the fear factor across the economy may be linked to nervousness about banking and budget cuts rather than poorer job or income prospects, Mr Hughes said. It also suggested many households were finding it difficult to make ends meet and might not be prepared for any significant increase in taxation or cuts to benefits in the Budget.
The survey is based on telephone interviews with around 800 people.