IRISH CONSUMER sentiment weakened in September as threats to employment and the worsening economic outlook turned consumers gloomier.

The KBC Bank Ireland/ESRI consumer sentiment index fell to 53.3 during the month, down from 55.8 in August. This was the poorest reading since February.

The index reached an all-time low of 39.6 in July 2008.

Although the index of current economic conditions weakened only marginally, to 72.3 from 72.6 a month earlier, it was the expectations index, which measures how consumers feel about the future, that fell sharply. This declined to 40.5 in September from 44.5 in August.

“The majority of consumers expect that the household finances will deteriorate, unemployment will rise and economic situation will become worse over the next 12 months,” said the ESRI’s David Duffy.

Consumers have dealt with spiralling fuel prices and increasing interest rates in recent months, prompting them to spend less and pay down debt. This trend has had a knock-on effect on the economy in recent years. Retail sales declined last month as consumers chose to hang on to their cash, leaving the economy largely dependent on exports for growth.

KBC Ireland’s Austin Hughes said the fall in consumer sentiment was not surprising, given the deteriorating outlook for the world economy.

“The fact that confidence didn’t collapse is encouraging but it owes a good deal to the fact that Irish consumers already took a fairly negative view of economic prospects,” he said. “In view of the poor global newsflow and concerns about layoffs in Ireland, it is slightly surprising that there was more of a weakening in those aspects of the survey that relate to household finances than in the macro elements.

“This may suggest a particular concern that the upcoming budget could hit households harder than had been expected.”

Further pressure could come with the budget in December, with expectations that tough measures will be introduced, worsening household spending power.