Irish consumer sentiment slumps after hitting "Boris bump"

DUBLIN, Aug 13 (Reuters) - Irish consumer sentiment slumped to a four-and-a-half year low in July as new British Prime Minister Boris Johnson's pledge to leave the European Union no matter what on Oct. 31 rattled his nearest neighbours.

While Ireland is considered the EU country with most to lose from Brexit, its economy is in very strong shape ahead of the potential disruption after growing faster than any other in the bloc every year since 2014 amid record employment.

However, confidence has been far more muted since Britain's 2016 referendum to leave and the KBC Bank consumer sentiment index sank to 85.5 in July from 90.9 in June.

That was its lowest level since November 2014 when Ireland had just emerged from an international bailout.

It was in contrast to an unexpected rise in confidence in Britain last month as Johnson took over, even as subsequent data showed the British economy shrank unexpectedly for the first time since 2012 in the second quarter.

Irish gross domestic product grew 2.4% in the first quarter of 2019, data showed last month.

"While the July confidence reading for the UK hints at a 'Boris bounce', it appears Irish consumer sentiment suffered a 'Boris bump'," KBC Bank Ireland chief economist Austin Hughes said on Tuesday.

"Our sense is that the combination of a tougher line and no specific solutions espoused by Boris Johnson in the race to become Prime Minister was the key driver of the drop in Irish consumer sentiment in July."

Hughes has previously noted that Irish consumers appear far more sensitive to the emerging downside risks around Brexit than their British counterparts, in part, he said, because Brexit is not of Irish consumers' making while some pro-Brexit UK consumers may feel any adverse economic effects are worth it.

The consequence for the currently open border between EU-member Ireland and British-run Northern Ireland in a no-deal Brexit "do not resonate to anything like the same degree (in Britain) that they do in Ireland," he added.

Irish consumers are also scarred by the painful experience of the financial crisis a decade ago, when Ireland's three-year bailout brought sharp tax rises and spending cuts.

However, Hughes said the strong performance in the economy suggests consumer spending should continue to increase even if Brexit-related nervousness is likely to significantly restrain the scale of that increase. (Reporting by Padraic Halpin; Editing by Andrew Cawthorne)