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Consumer sentiment slips back to February levels

Latest consumer sentiment data shows a drop in June as people continue to worry about the economic outlook, retaining their jobs and a likely ECB interest rate hike in July.

Image: mmmarilyn via Creative Commons

CONSUMER SENTIMENT slipped again in June, falling back to February levels, according to the latest data from KBC Bank and the ESRI.

The index fell from 59.4 in May to 56.3 in June.

Today’s report shows that Irish consumers are still concerned by the risk of job loss, the impact of further budget cuts, a looming ECB rate increase and a none-too-positive economic outlook. However, the ESRI and KBC Bank report said that “progress for Irish consumer and for the economy as a whole is more likely to come in a two steps forward, one step back fashion”.

Although consumer sentiment for the first half of 2011 is higher than for the second half of last year, it remains lower than the levels recorded at this time in 2010 (67.9).

The drop in Ireland’s consumer sentiment echoes a drop recorded recently in other countries, such as the US. A sentiment bounce in the UK in May was attributed to the royal wedding and unseasonably good weather, but visits by the British monarch and US president to Ireland that month apparently failed to have the same effect.

Today’s report says that this could be reflecting the understanding that the problems facing Irish consumers “don’t readily lend themselves to a significant spontaneous increase in ‘feelgood’.”

A drop in expectations for household finances over the coming year has been attributed to two factors in particular: the government’s announcement of a flat rate household charge next year, and the ECB’s expected interest rate increase next month.

The report says that although the drop in consumer sentiment shouldn’t be seen as a marked change in the public’s outlook, a “substantive improvement in domestic spending remains some months away”.

Minister for Finance Michael Noonan recently encouraged Irish consumers to get out and spend in order to boost the country’s economy. Noonan said: “What we really need is for people to go into the shops and start buying again.”

In a subsequent TheJournal.ie poll on the issue, 45 per cent of respondents said they didn’t have the money to spend or save, while 29 per cent said if you have money, you should spend it.

Read: Spend, spend, spend – and boost Ireland’s recovery >

Your say: Should we take Michael Noonan’s advice and spend spend spend? >

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