Business Sentiment Picks Up In December

Firms and households more upbeat in Bank of Ireland Economic Pulse

  • Bank of Ireland Economic Pulse at 92.4 in December, up 6.6 points on November
  • Services, Retail, Industry & Construction Pulses rise this month
  • Consumer sentiment also increases

Embargo Wednesday 28th December 2016: The Bank of Ireland Economic Pulse, which combines the results of the Consumer and Business Pulses, was 92.4 in December, up 6.6 points on November. The increase in the December Pulse was primarily led by business sentiment which was up 7.9 points, with consumer sentiment up slightly (+1.2 points) in the month.

Discussing the Economic Pulse, Dr. Loretta O’Sullivan, Group Chief Economist, Bank of Ireland said: “2016 was an eventful year and while sentiment picked up in December, developments over the course of 2016 have taken their toll and the Economic Pulse ended the year below where it started it. The general election and industrial unrest at home, the UK voting to leave the EU, sterling falling and the outcome of the US Presidential election all made it an uncertain year. These developments weighed on confidence, with both the Consumer and Business Pulses in December down on their January readings, albeit up on November.”

The Business Pulse, which surveyed 2,000 businesses, stood at 93.1 in December. All four Sector Pulses rose this month, as the initial shock associated with recent external events wore off. Firms in industry, services and construction were more upbeat about near-term prospects for business activity (retailers were less so) and hiring. “The Business Pulse rallied in December on the back of a pick-up in sentiment among firms in the industry, services, retail and construction sectors. The December findings indicate that most firms do not expect to change their selling prices in the period ahead, and also point to some pressure on the input costs front, excluding labour costs, over the past 3 months. Sterling has gained ground against the euro of late, while the dollar has strengthened post the US presidential election, which may go some way towards explaining this”, Dr. Loretta O’Sullivan commented.

The Consumer Pulse, conducted with 1,000 households, rose slightly, coming in at 89.5 (up 1.2 on November). Households were more upbeat about the outlook for the economy and their own finances this month, though buying sentiment was unchanged (35% considered it a good time to purchase big ticket items such as furniture and electrical goods). Dr. Loretta O’Sullivan, said: “With the festive season in full swing, the gloom that descended on households last month lifted a little in December. Two in three indicated that they are likely to put some money aside over the next 12 months, with younger cohorts, those living with family and in Dublin particularly avid in their saving intentions.”

The Housing Pulse rose marginally to 108.7 in December 2016, from 108.1 the previous month. The data show that one in three expect house prices to increase by more than 5% over the coming year, with the Dublin figure jumping to 47% in the month (from 38% in November).

“CSO data show that annual house price growth was somewhat stronger in Dublin in recent months, supporting expectations for further price gains over the coming months. Rent expectations remained in positive territory in December and as we head into 2017, it will be interesting to see how the newly passed legislation capping rent increases at 4% per annum in ‘pressure zones’ – Dublin and Cork city – feeds through to thinking,” Dr Loretta O’ Sullivan said.

The Bank of Ireland Regional Pulses monitor the three month moving averages and bring together the views of consumers and firms in different parts of the country. The results for December 2016 are mixed, with sentiment up in Munster, down in Connacht/Ulster and broadly unchanged elsewhere.

  • Dublin Pulse = 94.3 -0.5 points on the previous survey
  • Rest of Leinster = 91.2 no change
  • Munster = 88.6 +2.5 points;
  • Connacht/Ulster = 85.4 -1.5 points

Households in all regions apart from Dublin were more optimistic about the outlook for the economy this month, whereas the mood was universally upbeat when it came to their own financial prospects. Dublin continued to lead the way on the housing front though, with the December data showing a jump in the share of respondents in the capital that expect prices to rise by more than 5% in the next 12 months. The data also show that firms in Munster and Connacht/Ulster upgraded their expectations for near term business activity this month, and that businesses in each region plan to do more hiring in the period ahead.

The Bank of Ireland Economic Pulse survey is conducted in conjunction with the European Commission, with the data gathered by the bank feeding into the EU Commission’s Joint Harmonised EU Programme of Business and Consumer Surveys, a Europe-wide sentiment study running since the 1960s. The Economic Pulse surveys are conducted by Ipsos MRBI on behalf of Bank of Ireland 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.


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