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Consumer mood darkened by Budget

Tuesday, December 03 12:34:12

Irish consumer sentiment fell back in November from a six year high in the previous month as hard-hit taxpayers determined how another austerity budget would hit their wallets.

The government unveiled a seventh austerity budget in six years in mid-October in the run up to exiting a European Union/International Monetary Fund bailout and amid signs that the economy is set to pick up from an expected second year of near-stagnation.

The KBC Bank Ireland/ESRI Consumer Sentiment Index slipped to 71.0 from 76.2 in October when it reached its highest since June 2007, the year before a property bubble began to burst and a deep economic crisis took hold.

"The weakening in Irish consumer sentiment in November was entirely the result of a reassessment of the financial situation of households," KBC Bank Ireland chief economist Austin Hughes said.

"The survey results may be disappointing but they shouldn't be seen as entirely surprising. The Irish economic recovery now emerging is still tentative and many consumers remain severely cash constrained. A 'feelgood' factor remains absent."

The November reading is nonetheless the third highest since Ireland signed up to its 85 billion euro ($115 billion) EU/IMF bailout, well above a record low of 39.6 hit in July 2008 but below the 17-year old survey's historic average in the mid-80s.

The sub-index measuring the public's sentiment on jobs also turned positive for the first time in nine years and comes after data last week showed that unemployment fell at its fastest pace in four years.

The survey was taken after consumers had time to digest Finance Minister Michael Noonan's latest budget which comprises 2.5 billion euros in tax increases and spending cuts, less than the 3.1 billion originally planned.