Irish consumer sentiment dipped in July as fears over the Delta variant and its potential to derail recovery took hold.
The latest KBC Bank Ireland consumer sentiment index fell from a two-year high of 87.2 in June to 84.9 in July.
The 2.3 point drop constituted a marginal weakening in confidence, said KBC Bank Ireland economist Austin Hughes.
“This doesn’t suggest a marked change in thinking but does suggest consumers see clouds in the economic sky,” he said.
“A still uncertain economic outlook coupled with growing inflation fears, together with practical issues around the ‘opening up’ process and increasing nervousness about the Delta variant of the coronavirus, appear to have combined to make Irish consumers a little more cautious about the outlook both for the economy as a whole and for their own household finances,” he said.
Confidence slips
"A 'pause for breath' after five months of increasing consumer confidence is not entirely surprising and the scale of pullback in the sentiment index is relatively modest," Mr Hughes said.
The dip in confidence comes amid a marked pick-up in coronavirus case numbers and ahead of the reopening of indoor hospitality.
Taoiseach Micheál Martin said the Government is worried about the transmissibility of the Delta variant and the potential for rising case numbers to stall its reopening plan.
While the weakening in confidence can be linked to the economic outlook, Mr Hughes said a number of other concerns were also weighing on consumers.
“The first of these is the growing impetus in international discussions towards an agreement entailing a minimum global corporation tax rate above that currently prevailing in Ireland,” he said.
Material damage
“While this process is still far from complete or clear-cut, risks in this regard and an associated heavy focus on potentially material damage to the Irish economy, both in terms of revenue and reputation, might be expected to justify some downgrade to the economic outlook,” he said.
Mr Hughes said a second source of rising concern was house price growth, which has accelerated in recent months. “Debate around possible policy responses appears to have heightened worries in this regard,” he said.
The KBC survey detected only a fractional weakening in the outlook for jobs and a “negligible drop” in the assessment of household financial conditions through the past 12 months.
