Irish consumer sentiment plummets to four-year low on eve of Brexit

Irish consumer sentiment plunged to a four-year low in February, weeks ahead of neighbouring Britain’s scheduled exit from the European Union, a survey showed on Monday.

Ireland weathered the initial uncertainty from the 2016 Brexit vote, posting the fastest economic growth in Europe for five straight years, despite the fact being widely seen as the EU country with the most to lose from Britain’s exit.

The Irish 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.

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, mid-way through Ireland’s EU-IMF bailout.

The survey’s authors listed political stalemate in the United Kingdom, a nurses’ strike in Ireland 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, 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 twelve months jumped from 22 percent to 37 percent while the number expecting an improving jobs market fell from 40 percent to 22 percent.

“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.