Interest rate fears dent consumer sentiment

Consumer confidence fell last month as rising interest rates and higher prices hit sentiment. Figures from the IIB/ESRI monthly survey showed confidence dipping to 89.4 in June from a reading of 92.3 the previous month.

The index was dragged down by consumer concerns about their financial situation over the coming year. This more than offset an improvement in their assessment of their current financial wellbeing.

"Consumers have become much more concerned about the outlook for the labour market and the economy over the next 12 months," said ESRI economist David Duffy.

"At the same time, consumers remain concerned about the outlook for their personal financial situation. Consumers feel that economic news has been negative over the past month, particularly citing higher prices and increasing interest rates."

IIB Bank chief economist Austin Hughes said the data were disappointing, coming at a time when similar measures in other countries, such as Germany and the United States, had recorded "solid improvement".

"Interest rate worries continue to unsettle Irish consumers," he said. "The June results suggest that consumers have already downgraded the likely impact on their household finances but they have become more worried about the broader economic impact of late."

In the index of consumer expectations, which focuses on perceptions of the future financial situation, the economic outlook and employment expectations fell to 77.9 in June from 84.8 in May. Consumers were more negative about the prospects in each area.

On a view of their current position, the index rose to 106.3 from 103.4, with consumers becoming more positive about the current buying climate and their current finances.

"Presumably, many consumers still feel they have the financial wherewithal to hunt for bargains in the summer sales," said Mr Hughes.

The survey is conducted monthly by telephone interview with 900 people across the State.