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Consumer sentiment crashes amid coronavirus outbreak

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MOST people expect the coronavirus to have an impact on their personal finances.

Covid-19 has also sent consumer sentiment crashing.

Nine out of 10 consumers see the pandemic have a negative impact on the Irish economy.

Six out of 10 expect an impact on their personal financial circumstances.

The latest KBC Consumer Sentiment Index shows that sentiment fell sharply in March, even though the readings were obtained before the Government ordered schools and colleges to close.

KBC economist Austin Hughes said the Covid-19 hit to confidence strengthens the case for substantial and speedy policy response.

He said the fiscal package required from the State may be several times the amount initially allocated, but is manageable.

The KBC Bank Ireland consumer sentiment index slipped to 77.3 in March, from 85.2 in February.

Mr Hughes warned that the April sentiment reading will reflect a further marked increase in coronavirus-related concerns.

“The blow to consumer confidence on top of the emerging hit to incomes underscores the importance of a substantive and speedy policy response to the economic and financial fallout,” Mr Hughes said.

He said the 7.9 point drop in the KBC Bank sentiment index between February and March is significant.

But it is smaller than those seen on a couple of occasions lately when Brexit-related concerns prompted sharp changes in the mood of Irish consumers.

“However, a further marked weakening appears likely in April in the absence of a marked easing in health worries and/or expectations of decisive offsetting actions to limit the economic and financial fallout.”

The March survey found that about nine in ten consumers envisage some impact from the Covid-19 crisis on the Irish economy.

Among these, roughly one in four expected a substantial impact.

Only one in 11 consumers felt there would be no impact on the economy.

“In light of the escalation of dislocation in the interim, it seems likely that there is now universal appreciation of the economic threat posed by the virus.

“In turn, this suggests there would be widely shared support for a large scale policy response,” Mr Hughes added.

Just over half of Irish consumers see some impact from the Covid-19 outbreak on their own financial circumstances.

Only about one in three does not envisage any impact. One in eleven expects a substantial impact.

He said it was impossible to precise in relation to the scale of fiscal package required to support incomes and restore the economy.

However, as modified domestic demand amounts to around €50bn per quarter, it is possible that the fiscal cost could rise to four or five times the €3bn package initially indicated by the Government.

At current interest rates, and assuming ongoing support from European Central Bank bond purchase programmes, that might add a modest €40m to €50m to annual debt service costs, he said.

But even in very narrow accounting terms this should be seen as a very limited cost to preserve livelihoods that might otherwise not contribute to tax revenues in coming years, Mr Hughes said.

Online Editors