THE OUTLOOK for the Irish economy dulled further yesterday as housebuilders reported an 84 per cent fall in new starts and survey data indicated mounting pessimism among consumers.
Consumer sentiment fell for the sixth consecutive month in July as concerns over rising costs led to caution among households.
The IIB/ESRI index of consumer sentiment, published yesterday, dropped to a new record low of 39.6 last month, down from 42.2 in June. This is the lowest reading since the index began in 1996.
It comes as the building slump worsened last month, with the number of new home registrations hitting an all-time low. Figures released yesterday show that just 481 planned new homes were registered with industry guarantee body Homebond in July.
The figure amounts to just 16 per cent of the 2,575 registered in July of last year, and is believed to be the lowest in the guarantee scheme's 12-year history.
Austin Hughes, IIB chief economist, said a "double whammy" of rising interest rates and budget cutbacks had made Irish consumers more pessimistic about the outlook for their finances and "forcefully brought home to Irish consumers the prospect of tougher times ahead".
Mr Hughes said the declining confidence was being mirrored in other countries as data from the UK in July showed the weakest consumer sentiment since 1974 while France recently recorded its lowest reading in more than 20 years.
Consumer sentiment data is closely watched as consumer spending has been one of the driving forces of the Irish economic boom. Mr Hughes said the Government would have to choose between a stimulus package to encourage consumer spending or try to limit the deficit in the budget.
Also evident last month was a pronounced downgrading of consumers' assessment of their household finances. While they were more negative about the general economic outlook and employment prospects in July, "the reassessment of their own spending power is a more recent phenomenon".
NCB analyst John Sheehan said the home registration figures meant that the number of new homes built in the Republic next year could be less than 30,000, slightly less than half the number completed last year.
"If anything, it shows an accelerating rate of decline," he said. He pointed out that the building industry had been slowing rapidly in July 2007. He added that new home registrations in the year to date are already more than 60 per cent below what they were during the same period last year.
As homes are registered about nine months before completion, the system gives a clear picture of what the industry's immediate future holds.
Registrations are one of the most accurate guides to house building. Mr Sheehan explained that while buyers stay out of the market and while there is a backlog of existing stock, builders will not go ahead with new developments.
Every 10,000 new homes built in the Republic create an estimated 20,000 jobs.
