Consumer confidence dropped to a six month low in September, amid a rebound in oil prices, a further rise in interest rates and a gloomier economic outlook.
The Credit Union Consumer Sentiment Index declined from 62.2 in August to 58.8 in September, marking the second monthly drop in a row.
Modest improvements in confidence were recorded between April and July.
Austin Hughes, economist and author of the report said he is not surprised to see this downward trend, with many Irish households facing into seasonal spending pressures – such as back-to-school costs, heating bills and Christmas expenses.
Four of the five key elements of the Credit Union Consumer Sentiment Index posted weaker readings in September than the previous month.
The outlook for the jobs market was the exception – it saw a marginal bounce after declines in previous months.
The data shows that Irish consumers were more negative about the general outlook for the Irish economy.
Mr Hughes said this is likely reflecting some nervousness about the current momentum of the multinational sector prompted by weak export data for the second quarter and a surprisingly large fall in corporation tax receipts in August.
“In tandem with poorer activity data for the Euro area and the UK through the survey period, this may have triggered a further downgrade in Irish consumer thinking about the prospects for economic growth in the next twelve months,” he added.
When it comes to household finances, consumers are increasingly nervous about what might lie ahead.
The share of consumers who expect their personal finances to improve in the year ahead almost halved to just one in 20 of the consumers surveyed.
“We think this probably reflects a material impact on many households financial circumstances of the recent rebound in oil prices and the further increase in interest rates,” Mr Hughes pointed out.
The survey also hints at a spending slowdown, which would be bad news for retailers if this continued in the run up to Christmas.
Priorities for Budget 2024
As part of the survey, consumers were asked what they felt should be the three main priorities for the Budget package, which will be delivered on 10 October.
50% of Irish people said improving the health system should be the top priority.
People also want to see measures to offset cost of living pressures, and specific measures to deal with high energy costs – both cited by 40% of consumers.
39% of those surveyed said they believe housing should be a key priority.
Meanwhile, 28% of consumers said a reduction in the tax burden was their top priority, while 20% said increases in welfare rates.
Economist Austin Hughes said it may be the case that these areas are not highlighted as a key priority by most because such measures normally feature in the Budget.
Just 15% of those surveyed said climate change should be a top priority, while support for mortgage holders was cited by 14%.
Need for budget supports
“There are a lot of reasons for consumers to be nervous about the outlook,” Austin Hughes told Morning Ireland, pointing to back to school costs, mortgage pricing and fuel costs amid a recent spike in the price of oil.
“Add to this global concerns about an economic slowdown. They’ve been hearing about problems in the tech sector in Ireland, the drop in corporation tax in August. There are a lot of reasons for consumers to be nervous at the moment,” he said.
Mr Hughes said consumers were expecting a significant element of support in the budget.
“That message is an important counterpoint to the talk from what we might call the economic establishment about the government having to be too careful.
“The government does have to be careful but it has to be careful not to do too little as well as not doing too much,” he explained.
He said there was an argument for substantial cost of living supports.
“It’s not a case of a giveaway budget, it’s not a case of throwing money, but there are supports needed to get households through the winter months,” he concluded.