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Consumer sentiment has dropped to a 21-month low this month on broad based concerns about the economy.

In particular the KBC Bank Ireland consumer sentiment index found consumers were worried about severe financial pressures around their household finances.

Overall the index fell from 57.7 in June to 53.7 in July, despite a surprise 2.2 point rise in June.

“Worrying commentary on the prospects for energy and food prices likely prompted increased concern about consumers’ own capacity to weather a seemingly building financial storm,” said economist Austin Hughes, who prepared the index on behalf of the bank.

Despite their concerns though respondents indicated that they planned relatively limited adjustments in their spending plans though.

As a result, Mr Hughes said the the July reading appears consistent with a clear slowdown rather than a complete stop in consumer spending.

All five elements of the index weakened in July.

There was a marked increase in concerns about the outlook for energy costs over the coming winter as well as widespread reports of broader prices increases and a sharp escalation of pressure on food prices in particular.

Consumers were notably more negative about their own capacity to weather a gathering financial storm, caused by an expected increase in ECB interest rates.

The survey also saw some pull-back in buying plans, but the drop was smaller than in other areas and the level of this element of the survey has proven more resilient than others, Mr Hughes claimed.

“My sense is that July benefitted from a combination of summer sales and a determination to proceed with holiday spending,” he said.

Another special question inserted into the survey asked when consumers expect pressure on their household finances to be most severe.

A quarter said in the run up to Christmas in November or December, 12% said around back to school and college time in September and October, 11% said now and 10% said it is always severe.

Article Source: Consumer sentiment hits 21-month low in July -Will Goodbody – RTE

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