Consumer morale at its lowest since 2008
Households have low confidence about their finances as fears persist over public spending cuts, according to research by the Northern Bank.
The bank's survey of consumer confidence reached its lowest level since September 2008, when the collapse of US investment bank Lehman Brothers threw the world's economy into disarray.
Now the rise in VAT to 20% and soaring inflation have combined to undermine consumer confidence in Northern Ireland yet again.
Researchers gave a rating of 94 to confidence in the first quarter of this year, compared to 108 in the final quarter of 2010.
But the bank's chief economist Angela McGowan said the findings reflected "disconnect between public perception and reality".
She added: "While the economic outlook is testing in terms of inflation and reduced public expenditure, the situation is nowhere near as precarious as it was back in 2008 when the global financial industry collapsed.
"Without doubt there are challenges ahead and household incomes will be squeezed, but economic opportunities are also on the horizon.
"The global economy is set to grow by 4.7% this year but, unfortunately, local households are more focused on local public spending cuts and higher prices."
Out of 1,000 people canvassed by Northern Bank, 11% said their household finances would improve, while just over 40% said their position would get worse - a rise of 10% on the quarter before.
Just under a half of the households surveyed said their finances were worse than a year earlier, up 12% on the bank's last survey.
Ms McGowan said: "Consumers are fretting about public spending and they are feeling the impact of higher VAT, higher energy and food prices."
Low confidence has already spelled difficulties for many retailers of big ticket items.
Furniture business Dekko recently closed its stores and Ardis Living went into liquidation.
She added: "A bumpy recovery is not good for morale and we will really need the economy to start expanding again before consumer's expectations for their future finances start to improve."
The public needed reassurance by politicians that they could cope with reduced public spending, as public morale remained low, despite record job creation announcements, she said.