August brought a slight but steady decline in consumer confidence in the Republic as households braced for further price pressures, according to KBC Bank Ireland. The lender’s latest consumer confidence index weakened slightly this month to 53.4 from 53.7 the previous month, marking a 22-month low. Consumer confidence here has fallen for six of the past seven months.
Last month’s “very limited change” is probably best seen as signaling no major change in the mood of Irish consumers in recent times, said report author Austin Hughes. “This may be because the extent of the price pressures consumers are likely to face this winter and the form of policy measures to offset them are still unclear,” he said.
“While sentiment remains broadly at low levels at present, the circumstances facing Irish consumers are uncertain and threatening, which is reflected in the overall pessimistic tone of the survey,” Mr Hughes said. . “While the monthly decline in August was relatively modest, it was enough to hit a new 22-month low for Irish consumer confidence, a result that paints a more accurate picture of consumers struggling in an increasingly more difficult.”
The August survey coincided with several bleak global economic forecasts and evidence of further acceleration in domestic food price inflation as well as the heightened threat of a string of interest rate hikes from the from the European Central Bank, which is likely to add further pressure to already strained household finances, the KBC report notes.
On the positive side, international oil prices have eased as the government announced more substantial support measures in the upcoming budget.
The report also raised concerns about the employment outlook, which it described as “surprising” against the backdrop of a continued decline in unemployment and a series of positive jobs announcements, including the new that the American healthcare company Abbott will invest an additional amount of euros. 440 million in its Irish operations, creating 1,000 jobs.
“A combination of reports of a global decline in hiring by multinationals and hints of a slightly weaker domestic labor market recently, as suggested by the new monthly employment index from the Central Bureau of statistics, as well as anecdotal reports of a slowdown in domestic spending, may have contributed to this outcome,” Mr. Hughes said.
While September is expected to see the ECB follow up its interest rate hike from July with another hike, KBC’s August confidence survey contained a special question asking consumers what impact higher borrowing costs would have on their financial and economic situation.
Around one in four consumers (24%) expect the ECB’s higher interest rates to affect them indirectly by weakening economic activity and thus weighing on their income and/or job prospects, while 19% said they would be directly affected by higher borrowing costs.