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Big fall in consumer mood as Budget loom

Tuesday, October 02 13:14:02

Irish consumer sentiment plunged to its lowest level in months in September with the looming hairshirt Budget looming in December, the latest KBC Bank Ireland/ESRI Consumer Sentiment index shows today.

The index fell to 60.2 in September, down from a near five year high of 70 in August.

Last month's decline reversed most of the improvement seen through 2012 with the Sentiment Index now back at its weakest level since last February.

"In our analysis of the August sentiment survey, we suggested that an emerging focus on the nature and extent of cuts to public spending and tax increases needed to meet the adjustment target envisaged for next December's budget would test the resilience of the improvement in sentiment seen through most of 2012. We think recent intense media speculation on a range of potentially very painful Budget adjustments together with a couple of other negative economic developments unnerved Irish consumers," KBC said.

Doubts emerged about the extent of European support for Ireland's adjustment programme, while there were also some high profile job losses.

''For most of the past nine months, the improvement in sentiment reflected a gradually broadening view that the worst might be over,'' commented KBC's chief economist Austin Hughes.

''The September survey results suggest consumers are no longer sure that is the case. As a result, the fear factor has returned,'' he added.

The economist said that consumers are beginning to calculate the probable impact on their household finances of substantial cuts in heath and welfare spending and a new property tax. They are also having to deal with the news of looming increases in energy bills.

He also said the September reading emphasises how fragile the improvement in confidence has been this year.