SOARING OIL prices, increasing mortgage costs and fears over job security have driven Irish consumer confidence to its lowest level in 12 years. The overall IIB/ESRI index of consumer sentiment, published today, dropped to 48.8 in May, down from 56 in March, its lowest reading since the index began in 1996.

The corresponding figure for May 2007 was 97.7.

Austin Hughes, IIB chief economist, said the most worrying aspect of May’s results was the “sharp deterioration in consumers’ assessment of their personal finances”. He noted that people were becoming increasingly “panicked” about household finances.

Concern at a general weakness in the Irish economy has been superseded by a “nasty squeeze” in household spending power as the costs of the “necessities of life, mortgage, fuel and food, all rise”.

During the period of the survey oil prices increased from $112 to about $125, with the prospect of oil reaching $200 a barrel in the next year “a serious possibility”, the index report said.

In a car-reliant country such as Ireland, people were taking seriously the risk that petrol and diesel prices could continue to rise, leading them to become more negative about personal finances.

Last month also saw a number of mortgage lenders increase interest rates to offset the ongoing high wholesale cost of money to banks. This, coupled with the fact that higher inflation across the euro zone had all but removed any hope for a cut in interest rates by the Central Bank, “has completed a particularly unpleasant set of circumstances”, Mr Hughes said.