Bank of Ireland Economic Pulse falls in September
The Bank of Ireland Economic Pulse stood at 90.4 in September, down 3.3 in August and the lowest reading so far this year. The index, which combines the results of the Consumer and Business Pulses, was mixed in September. While household confidence and the Consumer Pulse rose for a second month running, firms in the industry, services and retail sectors were less upbeat this month, pulling the Business Pulse down.
The Economic Pulse surveys are conducted by Ipsos MRBI on behalf of the Bank with 1,000 households and over 2,000 businesses on a range of topics including the economy, their financial situation, spending plans, house price expectations and business activity.
The Bank of Ireland Economic Pulse stood at 90.4 in September 2016, with consumer confidence up in the month but business sentiment down.
Dr Loretta O’ Sullivan, Group Chief Economist, Bank of Ireland said: “While sentiment remains at a high level, Brexit has led to an increase in uncertainty, and a general softening in sentiment is evident when the recent Pulse readings are compared with those earlier in the year. While we saw an overall lift last month, business sentiment is a little unsettled at the moment as firms continue to assess the impact.”
The Business Pulse was down 4.4 in September 2016 to 89.6, its lowest reading this year. The jump in the Retail Pulse last month was more than reversed by a fall this month (-7.6 to 78.8), with the Industry Pulse also giving up some of August’s strong gains (-3.6 to 97.7). The data show that firms in the services sector scaled back their near-term expectations for business activity in September, which contributed to a drop in the Services Pulse (-5.3 to 89.7).
In contrast, the Construction Pulse rose significantly (+12.3 to 104.4) in the month, helped by an improvement in order books and positive sentiment on the employment front.
Discussing the business data, Dr Loretta O’ Sullivan said: “The construction sector is leading the way when it comes to job creation, with some 29% of firms planning on hiring in the next 3 months. Across the other sectors sentiment has dropped this month, following a strong performance last month in the retail and industry sectors.”
The Consumer Pulse gained further ground in September 2016, coming in at 93.6 and up 1.1 on August.
Households upgraded their assessment of economic developments over the past and coming year, though they took a slightly less favourable view of their own financial prospects. Buying and savings sentiment was little changed in September, with 32% considering it a good time to purchase big tickets items (34% last month) and 64% likely to save some money in the next 12 months (65% in August).
“The Consumer Pulse is showing that households are more positive about the economy, almost half expects unemployment to fall further while four in ten households are concerned about the tax burden,” said Dr Loretta O’Sullivan, Group Chief Economist, Bank of Ireland.”
The Housing Pulse picked up in September 2016, to 105.1 from 102.9 in August. Most survey respondents expect house prices to increase over the next 12 months, with one in four (28%) anticipating gains in excess of 5%, a slight increase on last month. Rent expectations were also in positive territory in September and as with prices, the share anticipating increases of more than 5% was up slightly.
“New CSO data show that house prices rose in all regions in the first seven months of 2016. The Housing Pulse points to a general expectation that further increases are on the cards,” according to Dr Loretta O’ Sullivan, Group Chief Economist, Bank of Ireland.
The Bank of Ireland Regional Pulses combine the views of consumers and firms in different parts of the country. The 3 month moving averages show that sentiment was down across all regions in September 2016. As the Pulses are calculated on a 3 month moving average basis, the large drop in confidence in July following the UK’s decision to leave the EU is still having an impact. The largest drop was in Munster which fell 5.8 on the previous index reading, to 87.9. The smallest drop was in the Rest of Leinster, which fell 1.8 to 92.6.
On the consumer side, Munster households led the way in terms of positivity around the economic outlook, but scaled back their assessment of their own financial prospects; as did households in Dublin. On the business side, expectations for near term activity were softer in each of the four regions in September, whereas the jobs outlook improved in all but Munster.
Bank of Ireland is partnering with the European Commission on the research. The data is used in the EU Commission’s Joint Harmonised EU Programme of Business and Consumer Surveys, a Europe-wide sentiment study running since the 1960s.