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Prospect of water charges damages consumer confidence

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Economist Austin Hughes said water charges have hit consumer confidence

Economist Austin Hughes said water charges have hit consumer confidence

Economist Austin Hughes said water charges have hit consumer confidence

Worries about water charges are being blamed for a dip in consumer confidence.

The consumer sentiment index dropped from a near eight-year high of 92.8 in September to 85.5 last month, according to KBC Bank and the Economic and Social Research Institute (ESRI).

KBC Bank said it was not clear what exactly caused the mood of consumers to darken but concerns in relation to water charges were likely to have played a role.

The proposals by the Central Bank to increase the size of deposits home buyers need to get a mortgage may have also played a role in sending consumer sentiment down, KBC Bank and the ESRI said.

KBC Bank economist Austin Hughes said: "Our sense is that concerns in relation to water charges and perhaps even increased deposit limits could have played some role, but it is not clear that these would account adequately for either the scale or breadth of the drop seen in the sentiment index in October."

The survey was largely completed before last month's Budget, when most pre-budget commentary was upbeat and not warning of impending pain, he said.

However, Mr Hughes added: "A notably increased focus on water charges of late has crystallised concerns in relation to continuing pressures on household finances.

"At the margin, the risk that new Central Bank proposals on mortgage lending could have some adverse consequences for the property market may also have weighed on sentiment."

He added that the drop may also reflect the uneven nature of Ireland's economic recovery or be the result of a statistical blip.

He said: "The results are consistent with many consumers' experience of a recovery that they hear and read to be very healthy but one which they are not feeling in their personal finances."

He said the drop in consumer sentiment in October was the second biggest monthly fall in the past 22 months.

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