Budget kite flying hit consumer sentiment, claims trade group

Consumer sentiment plummeted in the aftermath of the Government’s latest austerity budget, new data reveals.

The latest consumer sentiment index from KBC Bank Ireland and the Economic and Social Research Institute showed a drop from 63.8 to 49.8 – the lowest point in a year.

David Fitzsimons, chief executive of trade body Retail Excellence Ireland, said the decline was evidence that holding the budget in December affects the public’s spending habits.

“The kite flying around the budget does not help consumer sentiment and causes many consumers to postpone their spend,” Mr Fitzsimons said.

He said his organisation would continue to campaign for the Government to make its tax hike and spending cut announcements earlier in the year to help boost retail sales in the run-up to the holidays.

“This is something which Retail Excellence Ireland has campaigned for on behalf of its 11,000 store members and will provide retailers with a much-needed boost for Christmas 2013,” he said.

KBC chief economist Austin Hughes said there was little doubt that consumers felt that Budget 2013 – with its €3.5bn adjustment – would make them worse off.

“This prompted an outsized fall in sentiment in December,” he said.

Mr Hughes pointed out that substantial falls were also recorded at the end of 2010 and 2011.

The drop in the consumer sentiment index, which measures economic confidence and the public’s willingness to spend, was the largest monthly decline in its 17-year history.

“First of all, consumer confidence, like the broader condition of the Irish economy, remains fragile,” Mr Hughes said.

“Second, the average Irish consumer continues to face significant pressure on their spending power and uncertainty about their future.”

He said the reduced consumer confidence therefore suggested activity in the domestic economy was likely to see merely a modest and gradual turnaround over the next two years.

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