Consumer sentiment plunged to a four-year low in February, weeks ahead of the UK's planned exit from the European Union, a new survey shows today.
The KBC Bank Ireland/ESRI Consumer Sentiment Index plunged to 86.5 in February from 98.8 in January, its sharpest fall since December 2012.
The survey listed political stalemate in the UK, the recent nurses' strike and a scandal around spending over-runs at the planned National Childrens' hospital as factors that could have impacted sentiment.
"We don't believe that the outlook for the Irish economy or the prospects of Irish consumers deteriorated dramatically last month," said Austin Hughes, chief economist at KBC Bank Ireland.
But "the risks to the future were seen to materially worsen," he said.
He added, however, that any improvement in hopes that a no-deal Brexit may be avoided could quickly prompt improvement in the index.
All five elements of the index showed declines, with the sub-indices on consumer expectations and respondents' personal financial situation in 12 months' time showing particularly sharp falls.
The share of consumers expecting unemployment to rise in the next 12 months jumped from 22% to 37%, while the number expecting an improving jobs market fell from 40% to 22%.
"This sharp shift towards greater caution among consumers is noteworthy and is likely to remain sensitive to further developments in Brexit negotiations over the short run," the ESRI’s Philip Economides said.
Ireland weathered the initial uncertainty from the 2016 Brexit vote, posting the fastest economic growth in Europe for five years in a row, despite the fact being widely seen as the EU country with the most to lose from Brexit.
The Central Bank has warned that if Britain crashes out without a deal on March 29 it could knock as much as 4 percentage points off Ireland's growth rate in its first full year.