Worries over day-to-day bills make consumers gloomier
WORRIES about household finances have made consumers gloomier, a new survey shows.
Mortgage hikes and the continuing rise in unemployment have combined to weaken consumer sentiment.
The KBC Ireland/ESRI consumer sentiment index fell in July from 67.9 to 66 as households formed a more negative view about the outlook for the economy.
However, the overall index still remains above the 50 mark that separates expansion from contraction. Last year, the index registered 49.5 in July, after a record low of 39.6 in the same month in 2008.
The index of current conditions slipped from 88.4 in June to 85.7 last month, while the expectations index also fell.
Economic and Social Research Institute (ESRI) economist David Duffy said the cost of running households was a big concern.
"The decline mainly reflects consumers becoming more concerned about their current household finances," Dr Duffy said.
"Consumers also have some concerns about the outlook. The expectations index weakened to 53.1 from 54.1 in June, on the back of a more negative view of the outlook by consumers for the economy and labour market over the next 12 months."
Despite the fall, the report said the trend in sentiment still appeared to be improving modestly. The three-month moving average rose to 66.5 from 66.3, the highest reading since the end of 2007.
KBC Ireland's chief economist Austin Hughes said the weakening sentiment in July was not surprising following a stronger trend in recent months.
"The reality is that for most people conditions remain difficult and the future still looks uncertain. While the Irish economy may not be as weak as during 2009, there is little to spark a clear 'feel-good factor'," he said. "So, at best, sentiment and household spending seems likely to move in a pattern of two steps forward and one step back."
It was clear that consumers face continuing pressures making ends meet each month.
Poor prospects about jobs are also a big factor in the gloomier mood among consumers.
There were indications in July that the economy may be about to turn around, Mr Hughes said. But there was also data that month that clearly indicated that a turnaround in the jobs market was still some way off.
"One clear message from Irish consumer sentiment data for July is that any emerging recovery in Irish consumer sentiment and spending remains fragile," Mr Hughes said.
He said similar indicators in the US and Britain, Ireland's two main trading partners, had also seen dips.
A survey released on July 30 showed US consumer sentiment plunged in July to its lowest level since November on bleak prospects for jobs and income a year after the economic recovery began there.
"The July results suggest Irish consumer sentiment is still fragile, but it doesn't seem to be sending the same signals as in the US, where tumbling confidence data is warning of a faltering recovery," Mr Hughes said.