Consumer confidence falls to 10-year low
CONFIDENCE among consumers has hit its lowest level in 10 years.
A combination of economic uncertainty and the two-day austerity Budget last month made consumers gloomier about their household finances.
The index that measures the mood of consumers fell to 49.2 in December, down from 60.1 in November.
The survey, compiled by the ESRI and KBC Bank, found that the prospect of years of squeezed personal finances is darkening the outlook of households.
KBC economist Austin Hughes said consumers were "very nervous" about their finances and the economy in general. He put the huge drop down to the "frenzied" discussions about the future of the euro and December's Budget.
While all areas of the index fell, the biggest decline was in consumer expectations about the economy over the next year.
Mr Hughes said there had been big swings in the survey over the past month which reflected public uncertainty.
"It will probably take at least another couple of months before consumers can decide whether the fears they signalled in the December sentiment survey prove to be exaggerated or become a painful reality."
Mr Hughes said the eurozone crisis had helped push consumer sentiment up and down in the last quarter of 2011, with ECB rate cuts in the autumn boosting the mood.
The failure of European leaders to agree a comprehensive solution to the crisis punctured sentiment, as did frenzied discussions in the international media about the future of the single currency.
Consumers were primarily worried about the outlook for their household finances and the outlook for the economy over the next 12 months.
Retail Ireland, the IBEC group that represents retailers, said the sharp fall in consumer sentiment highlighted the need for immediate government action to restore confidence, boost consumer spending and revive Ireland's retail sector.
Retail Ireland chairperson Frank Gleeson said: "There is every chance that the VAT rise announced in Budget 2012, coupled with social welfare cuts, higher charges for services and increased fuel duties, will see consumers cut back on spending even further.
"This will undermine growth and economic recovery. If the Government is serious about getting the domestic economy moving and rescuing Ireland's retail sector, it should review the figures at the end of March and reverse the VAT rise if it is not having the desired effect."