Irish consumer sentiment hit a fresh all-time low last month as the outlook for personal finances, borrowing costs and the economy darkened further, a survey showed on Wednesday. The IIB Bank/ESRI Consumer Sentiment Index fell to 39.6 in July from 42.2 in June, charting its lowest level since the survey began 12 years ago. June was the survey's previous low.
The reading contrasts with the 74.7 posted in July 2007. A collapse in Ireland's once thriving property sector has brought the 'Celtic Tiger' boom of the last decade to a grinding halt. Economists now expect Ireland to enter its first recession since 1983.
The government has said it will cut spending this year and next to address a 3 billion euro ($4.65 billion) shortfall in tax receipts. "The 'double whammy' during July of higher monthly loan repayments and possibly significant budget cutbacks forcefully brought home to Irish consumers the prospect of tougher times ahead," said IIB Bank Chief Economist Austin Hughes.
The forward looking expectations component of July's index dropped to 23.3 from 26.4 in June, while the measure of consumers' perception of their current situation fell to 63.8 in July from 65.7 in the previous month.
The European Central Bank is widely expected to leave borrowing costs unchanged when it meets on Thursday after it raised its main interest rate in July to 4.25 percent, citing the need to anchor euro zone inflation expectations. Hughes said the ECB rate rise in July further weakened the finances of many borrowers in Ireland already under pressure from slower income growth and rising fuel and food costs.
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