Irish consumer sentiment has weakened significantly in the wake of February’s inconclusive election result and ahead of Britain’s crunch vote on EU membership.
The latest KBC Bank Ireland /ESRI survey recorded its largest monthly drop in 17 months in March with the report’s main index dropping from 105.8 to 100.6, a six-month low.
The darker mood among Irish consumers was linked to the prospect of a prolonged period of political uncertainty following February’s poll.
It was also associated with greater media coverage of the looming Brexit vote in the UK, which could have big implications for Ireland’s buoyant export trade.
The decline comes despite a strong sequence of domestic economic data including healthy job numbers and better-than-expected growth figures.
While still pointing to a broadly positive assessment of Irish economic prospects the shift in sentiment suggests consumers are “increasingly conscious” of the downside risks to recovery, the report said.
The survey’s three-month moving average of sentiment, arguably a more accurate barometer, also fell for the first time since September, confirming a significant change in the mood of Irish consumers.
The report said that the weakening in Irish sentiment must also be seen as part of broader global deterioration linked to unease about the Middle East and the health of the global economy.
There were declines in sentiment in the US, the euro area and the UK during the survey period.
"An altogether more tentative economic upswing in the euro area together with increasing concerns about migration and terrorism - even though the survey was conducted before the most recent atrocities in Brussels - has left many European consumers more anxious about the future," KBC's chief economist Austin Hughes said.
The March survey revealed increased concerns about Irish economic prospects but did not signal a collapse in confidence, he said, noting more consumers still expect the Irish economy to improve (46 per cent of responses ) rather than deteriorate (15 per cent of responses) in the next twelve months.
"This is largely a reflection of fewer positive views rather than an increase in particularly gloomy assessments," Mr Hughes said.
“The March survey hints that the persistence of the Irish economic upswing looks a little less certain but the details also argue that a dramatic downturn is still regarded as remote,” he added.
