Irish consumer sentiment is now at its lowest since late 2004, in spite of an apparently healthy economy.

The consumer sentiment index, produced by the Economic and Social Research Institute (ESRI) and Irish Intercontinental Bank (IIB), shows that consumer sentiment weakened from a level of 99.6 in June to 96.5 in July.

Austin Hughes, the chief economist of IIB, said: "Most existing job holders are seeing only modest increases in take home pay while their heating and energy costs are increasing as we head into the winter."

A range of factors may have made consumers more cautious about buying big-ticket items. These include rising energy costs, worries about personal debts and concerns about global terrorism, according to Mr Hughes.

The index is made up of two component indices. The first, the index of current economic conditions, fell to 101.9 in July from 107.7 in June. This outcome reflects a more negative perception by consumers of the current buying climate, as well as of their present financial situation, according to index co-author and ESRI economist, David Duffy.

The second, the index of consumers' expectations, declined to 93.0 in July, compared with 94.2 in June - implying a modest downturn in consumers' expectations for the economy's future.

The value of the overall index was higher at the turn of the year than at any time since the spring of 2001, but has fallen gradually since then.

Mr Hughes related the trend to the impact on consumers of less positive economic growth now in comparison to levels pertaining during the late 1990s.

"Around the turn of the year the expectation was that Celtic Tiger II was materialising with a renewed prospect of significant increases in take home pay. Those expectations are not materialising."

This latest data follows evidence published last week by NCB Stockbrokers of an upbeat mood among Ireland's service industry sector.

Confidence in this particular sector - which accounts for over half the number of jobs in the economy - reached a five-year high in July, while job creation potential in the sector continued to be strong.

The NCB survey covers sentiment among service businesses and reflects the impact of factors such as an improved global environment for exporters in the service economy.

The survey also mirrors the benefits to the sector from a more abundant supply of cheaper labour.

However, these factors may not benefit consumers, according to Mr Hughes.

"Although those taking extra jobs in the economy are better off, most workers in existing jobs are not benefiting from this."