Consumer Index Down

11 August 2011 - Which Way to Pay

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Consumer Index Down

Consumer confidence has fallen in July as a result of the global financial crisis as well as the European Central Bank’s move to hike rates a second time in June. According to KBC Bank and the ESRI, the consumer sentiment index weakened to 55.9 from 56.3 in June and thereby setting the path for lower consumer activity in following months. June’s index was the weakest reading since the Government came to power in February.

It seems that even steep price discounts by retailers have not been enough to tempt spending in a climate where many are insecure of their financial futures. Retailers are sure to feel the blow especially since the index is dramatically less than that of 2010 where a near 3 year high of 67.9 was reached.

The downturn in spending reflects the concern felt worldwide from the USA downgrade as well as the continuation of the eurozone debt crisis. Many are now further concerned about what this may mean in terms of December’s Budget given that tax hikes of €1.5bn and spending cuts of €2.1bn are already planned.

KBC Bank’s chief economist , Austin Hughes said: "An incessant focus on the crisis has made the average Irish consumer painfully familiar with a large number of previously exotic financial terms.

"Even if the technical complexities around Greek debt sustainability or the US debt ceiling remain almost incomprehensible, there is a clear understanding of the damaging consequences of the crisis for the future living standards of the average Irish family."

However despite Mr Hughes also commenting that the current climate may impact on exports, there was an underlying optimism in referencing when the fiscal and banking crises began. In July 2008 sentiment hit an all-time low of 39.6 showing that the economy has been more resilient this time round in response to global financial turbulence.

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