Consumers are more nervous about spending their money as optimism about household finances following last month's Budget is outweighed by mounting fears for the jobs market.
The consumer sentiment index published by the Economic and Social Research Institute (ESRI) and IIB Bank shows that consumer confidence fell again in December, despite a "mildly positive reaction" to Budget 2008.
"There is a clear sense of foreboding about what 2008 may hold for the Irish economy," said IIB Bank chief economist Austin Hughes.
Consumer desire to buy "big ticket" items such as white goods and furniture fell sharply last month. Although people traditionally hold off until the January sales to splash out on major household purchases, the deterioration in the buying climate was the steepest in the month of December for seven years. "It hints that consumers are beginning to tighten their belts," Mr Hughes said.
The index reflected reports of a sluggish period for retailers between mid-November and mid-December, he added.
The latest footfall figures (which show the number of people entering a store or shopping area) from Experian suggest that the new year hasn't set the tills ringing, with fewer shoppers hitting the sales in the first week of 2008 than in the first week of 2007.
Experian's figures show that the number of bargain hunters fell 2.4 per cent in the first week of January, despite a temporary increase in footfall in the last week of 2007 compared with the final few days of 2006.
Although consumers have become increasingly worried about the direction the labour market may take, their view of their personal finances actually improved.
However, ongoing pressures on oil and food prices, as well as uncertainty about interest rates, means that the number of con- sumers who believe their finances will weaken in 2008 still outnumbers those expecting better fortunes by three to one.
There were a number of significant job loss announcements during the period that the survey of 1,200 consumers was conducted. These included 500 redundancies at medical devices group Abbott Ireland in Galway, 150 job cuts planned at drinks firm C&C and 50 jobs at the Denny meat plant in Tralee, Co Kerry.
Although the consumer sentiment index fell only slightly in December - down to 62.7 from 63.1 in November - ESRI economist David Duffy said it was too soon to say if this suggested that the decline in sentiment was coming to an end.
The index remains close to its all-time low point of 60.9, reached in July 2003, and is well below the 89.8 level reached in December 2006.
