The overall KBC Ireland/ESRI Consumer Confidence Index weakened to 49.5 in July. This compares to a figure of 53.4 in June, and to an all time low of 39.6 that was reached a year ago in July 2008.

Commenting on the results David Duffy, ESRI, said:

• The results for July show that consumer sentiment weakened primarily due to consumers becoming more negative about the economic outlook for the next 12 months.

• The forward-looking expectations index fell to 30.6 in July from 39.1 in June, with consumers more pessimistic across all the forward looking components of the index.

• In contrast, the index of current economic conditions rose slightly to 77.6 from the 74.6 recorded in June. This is largely due to an improvement in consumer’s perception of the current buying climate.

In addition, Austin Hughes, KBC Ireland, noted:

• After the unexpectedly large improvement in consumer sentiment in June, the drop in July wasn’t entirely a surprise.  Indeed given the very negative tone of the IMF report on Ireland and a spate of job loss announcements, a larger fall might have been expected.  Instead, it appears that the underlying trend in sentiment is stabilising even if a return to anything like normal conditions in confidence and consumer spending seems quite far away.

• It is notable that consumer sentiment measures weakened in Ireland and in the US in July whereas similar indicators improved in a number of continental European economies.  This may owe something to a notably greater fear of job loss both here and in the States which is weighing on confidence and household spending.  This raises important questions as to whether ‘speedy’ job cuts will limit the final cost in terms of employment and whether other economies can successfully ‘hoard’ labour through the downturn.

Hughes also said the drop in Irish consumer confidence in July was consistent with the decline seen in a number of confidence indicators in the US but contrasted with slight improvements in similar measures for a number of European countries; for example Germany’s GFK measure of consumer confidence jumped to a 14 month high while Italy’s ISAE consumer confidence index posted the strongest reading since November 2007. This divergence between the US and Irish experience on one hand and of various European countries on the other may reflect heightened job insecurity in the ‘Anglo Saxon’ economic model operating here and in the states.  The recent deterioration in US confidence reports highlight particular worries about jobs as tentative signs of a stabilisation in activity have failed to translate into an improved outlook for jobs.  In contrast, direct efforts to protect jobs have been at the centre of the policy response to the global crisis in several continental European countries. The notably greater immediate threat to employment in the US and in Ireland is clearly heavily reflected in a correspondingly darker mood among consumers here and in the states.

Three of the five elements of the Irish consumer sentiment survey weakened in July but the sharpest deterioration related to the outlook for employment.  This reflected both the release of official data showing that employment in Ireland fell by almost 160,000 in the past year and a wide range of job losses announcements during the survey period.  Among the latter were layoffs at Cadburys, Tom Hogan Motors, ABB, Smurfit Kappa, Bausch & Lomb and Diageo.  The risk and, for many, the reality of unemployment remain the pivotal concerns for Irish Consumers.  Although the July employment component of the sentiment survey is not quite as poor as those recorded in the early months of 2009, job worries continue to weigh heavily both on sentiment and on the spending decisions of Irish households, Hughes added.