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Irish consumer confidence plunges on inflation fears, Ukraine -survey

Irish consumer confidence plunges on inflation fears, Ukraine -survey
Irish consumer confidence plunges on inflation fears, Ukraine -survey   -   Copyright  Thomson Reuters 2022
By Reuters

DUBLIN – Irish consumer confidence suffered its sharpest monthly drop since the start of the COVID-19 pandemic as concerns around the conflict in Ukraine and soaring inflation weighed heavily on sentiment, a survey showed on Thursday.

The KBC Bank Ireland consumer sentiment index plummeted to 67.0 in March from 77.0 in February, the largest month-on-month drop since April 2020 when severe health-related restrictions closed large swathes of the Irish economy.

“Not surprisingly, a torrent of bad news on living costs caused consumers to downgrade their assessment of their personal financial circumstances through the past 12 months,” said KBC Ireland chief economist Austin Hughes.

“The change was relatively modest compared to their thinking on the outlook for the next 12 months which saw a marked worsening, with negative responses outnumbering positives by over 4 to 1 compared to just under 2 to 1 in February.” 

While the March 2020 shutdown of the economy led to by far the biggest drop in the survey’s 26-year history, the weakening in March 2022 represented the 11th largest month-on-month fall on record.

Some 85% of consumers expect to curtail their spending as a result of higher inflation and increased uncertainty, the survey found, with more than half of that group saying the adjustment will be “significant” rather than slight.

Hughes said the March survey probably represented the first time in several decades that an inflation surge has undermined Irish consumer sentiment. Annual inflation is at a 21-year high of 5.6% and set to rise further due to increased energy costs.

Sentiment proved resilient to rapid inflation in the early 2000s when consumer price growth reached 7% because price rises were primarily driven by booming domestic demand, rather than an external cost-push, he added.