Thursday 21 November 2019

Brexit fears dragging household confidence down to six-year low

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Charlie Weston

Charlie Weston

UNCERTAINTY is weighing on householders, pushing a key measure of consumer confidence to a six-year low.

UNCERTAINTY is weighing on householders, pushing a key measure of consumer confidence to a six-year low.

Worries about household finances and the impact of a no-deal Brexit pushed consumer confidence to its lowest level since August 2013.

Disappointment at the failure of the Budget last month to deliver much to taxpayers has also hit the confidence of consumers.

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Pressure on household finances has prompted people to tell surveyors they are easing back on spending.

The Consumer Sentiment Index fell for a fourth month in a row in October. It was the first time this has happened since late 2012.

A fall from 75.3 to 69.5 was recorded in the index last month.

KBC Bank, which compiles the index, said there was little doubt that the ongoing decline was due to nervousness around Brexit.

Chief economist at KBC Bank Austin Hughes said: "The results probably reflect consumers' concerns around seemingly intractable political problems in the UK that threatened to prevent a deal being agreed.

"However, the weaker October reading may also hint at a measure of disappointment with Budget 2020."

Giveaways were restricted in the Budget due to concerns about the impact Brexit could have on the economy.

The most pronounced weakness in the index was in the household finances and spending component.

A failure to adjust the income tax system to stop people paying more and the minor adjustments to welfare payments have had an impact on the mood of consumers.

Mr Hughes said a question in the September index survey found that 72pc of consumers felt Budget adjustments to tax and social welfare rates were important to their financial circumstances.

"A notable weakening of household finances and spending plans in the October survey could also be simply an indication of ongoing pressure on many households' finances, that mean even modest giveaways are critical to making ends meet," Mr Hughes said.

He added that a key question is whether uncertainty will continue to weigh on Irish consumer spending, as it has done since the Brexit referendum three years ago.

He said that since 2016, growth in household spending has been lower than the rise in incomes.

But before the Brexit referendum, spending typically outpaced income growth.

Brexit may be making Irish consumers more cautious, but it is also increasing their spending power, Mr Hughes said.

The weaknesses in sterling and more intense retailing competition resulted in retail prices during the third quarter being 2.3pc lower than a year earlier.

But he said unless sterling suffered persistent declines, this boost to spending power may wane.

Irish Independent

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