Bank of Ireland Economic Pulse shows drop in business and consumer sentiment in July

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  • Near-term business prospects downgraded and uncertainty a factor for many firms
  • Households more concerned about the economic outlook
  • However one in three still expect household financial situation to improve over next 12 months

The Bank of Ireland Economic Pulse stood at 91.2 in July 2016, its lowest reading this year. The index, which combines the results of the Consumer and Business Pulses, was down 10.3 on June. A sharp fall in sentiment was evident among firms, with the Business Pulse down 11.1, while the Consumer Pulse fell 7.1 in the month.

The July surveys were carried out after the UK’s “Brexit referendum vote. 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.”

Economic Pulse

The Bank of Ireland Economic Pulse stood at 91.2 in July 2016, reflecting a drop in both the Business Pulse and Consumer Pulse.

Dr Loretta O’ Sullivan, Group Chief Economist, Bank of Ireland said: “Brexit has generated a lot of uncertainty and, as expected, consumer and business confidence took a large hit in July. We will be closely monitoring the data to see if this is sustained over the coming months.”

Business Pulse

The Business Pulse also fell to a 2016 low in July, coming in at 91.6 (down 11.1 on June’s reading). The Retail and Construction Pulses saw very steep drops in July (-21.5 and -18.2 respectively), with sentiment among service firms also down (-9.0), less so among industry (-1.5).

Firms in all four sectors pared back their assessment of business prospects and hiring plans for the coming 3 months, though looking further ahead, the majority have ambitions to grow their businesses over the next 1 to 3 years. The July survey findings also indicate that 38% of firms in industry and services, 25% in retail and 35% in construction are planning on increasing basic pay in the next 12 months.

Discussing the business data, Dr Loretta O’ Sullivan said: “Our Business Pulse fell sharply in July with near-term prospects being downgraded and the fall in sterling a concern for some firms. Over the course of the year, there has been a notable step up in the number of service, retail and construction firms citing uncertainty as a key factor currently limiting their business.”

Consumer Pulse

The Consumer Pulse fell from 96.8 in June to a 2016 low of 89.7 in July. The latest data show households downgrading their assessment of their own financial situation and their outlook for the economy, as well as scaling back expectations for further falls in unemployment. Buying sentiment was a bit more mixed in the month, with 32% indicating that now is a good time to purchase big ticket items (down from 37% in June) and 28% likely to buy a car in the next 12 months (up from 26% when this question was last asked in April).

Almost four in ten survey respondents expect their wages to increase over the next 12 months. 34% said that they expect their household financial situation to improve over the next 12 months (down from 39% in June), while 15% expect that it will disimprove (up from 10% in June).

Housing Pulse

The Housing Pulse came in at 102.5 in July 2016, down 3.4 on June. While the number of respondents expecting house prices to increase in the coming year remained in the majority, the balance eased back a little, as it did for rents. 67% said that they expect house prices to increase over the next 12 months, while 62% expect rents to increase.

The July survey results also indicate that 7% are planning on buying a property in the next 12 months, with life stage, space requirements and the cost of renting cited as the main reasons for doing so. In addition, some 66% are of the view that it is cheaper to buy than rent in their area. More than half (56%) of respondents said it is a good time to buy a property and 44% consider it a good time to sell.

“Pressures in the housing market have led to higher rents, and 66% of respondents are of the view that it is cheaper to buy a property than rent in their area. On the home improvement front, one in four households is likely to spend a large sum of money on improvements or renovations in the next 12 months,” according to Dr Loretta O’ Sullivan, Group Chief Economist, Bank of Ireland.

Regional Pulse

The Bank of Ireland Regional Pulses, which bring together the views of consumers and firms in different parts of the country, show that sentiment (3 month moving average) was down across the board in July 2016. Households in all regions scaled back their assessment of prospects for the economy and their own finances this month, led by Munster. 33% of households in Munster predicted an improvement in their household financial situation over the next 12 months, compared to 44% in June.

Similarly, expectations for business activity and hiring over the coming 3 months were softer, particularly in Connaught/Ulster.

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.


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