Bank of Ireland Economic Pulse falls for second consecutive month

  • Economic Pulse still off pre-Brexit levels
  • Renting a key concern for two in five households
  • Households more upbeat this month

The Bank of Ireland Economic Pulse came in at 91.8 in June 2017. The index, which combines the results of the Consumer and Business Pulses, was down 0.6 on May’s reading and 9.7 on this time last year.

Discussing the Economic Pulse, Dr. Loretta O’Sullivan, Group Chief Economist, Bank of Ireland said: “A year on from the referendum and the UK’s decision to leave the EU, the Bank of Ireland Economic Pulse is still significantly off its pre-Brexit levels.”

“It was a mixed picture once again this month, with the Consumer Pulse gaining some ground but the Business Pulse giving up some. While households were more positive about the economy and their own financial situation, the uncertainty generated by political shifts including the Conservative party losing its majority in the UK parliament weighed on business sentiment.”

Consumer Pulse

The Consumer Pulse gathered pace in June 2017, coming in at 96.4. This was up 2.3 on last month and its highest reading since the Brexit vote. Households upgraded their assessment of the economy this month and were also more positive about their personal finances. The buying climate was little changed, with 37% considering it a good time to purchase big ticket items such as furniture and electrical goods. On the savings front, two in three indicated that they are likely to put money aside over the next year, with younger cohorts, students and those living with family leading the way.

Dr. Loretta O’Sullivan commented; “There is a widely held belief that warmer weather acts as a mood boost. Judging by the results of the latest Consumer Pulse, this looks to be holding up with households more upbeat this month.”

Business Pulse

The Business Pulse stood at 90.7 in June 2017, down 1.4 on May and 12 on this time last year. The Services, Retail and Construction Pulses all fell in the month, whereas the Industry Pulse picked up. With thoughts turning to the start of the Brexit negotiations and the inconclusive outcome of the UK general election weighing on minds, firms in each of the four sectors scaled back their expectations for business activity and hiring over the next 3 months. Speculation about the future of the help-to-buy scheme for first time buyers – which is under review at the moment – may also be having an impact on construction sentiment which saw a large drop in June.

Dr. Loretta O’Sullivan commented; “Recent developments in the UK have led to some exchange rate volatility. Sterling strengthened a little against the euro in the immediate run up to the UK general election on June 8th, but has lost ground again post the result and currently stands at around 88p. The weaker pound is a headwind for Irish firms selling into the UK market and the Pulse data show some softening in export orders in June. It should be a positive for importers going forward though.”

Housing Pulse

The Housing Pulse eased back for a second month running in June 2017 to 114.2, though it is still at an elevated level and 8.3 higher than this time a year ago. While the majority of those surveyed expect house prices to increase in the next 12 months, the balance between positive and negative responses was down a little in June in all regions bar the Rest of Leinster. The on-going mismatch between supply and demand is impacting the rental market as well, with the cost of renting a key concern for two in five households.

Dr. Loretta O’ Sullivan commented; “The help-to-buy initiative for first time buyers is currently under review and while it is too soon to draw any firm conclusions, talk that it might be phased out may be starting to impact future price expectations. This month also saw a jump in the share of builders citing insufficient demand – and a tick up in the share citing uncertainty – as a factor limiting their activity, suggesting that speculation around the scheme may be affecting the construction sector too.”

Regional Pulse

The Bank of Ireland Regional Pulses combine the views of consumers and firms in different parts of the country. The results for June 2017 show that sentiment (three month moving average basis) was up in Dublin, broadly unchanged in the Rest of Leinster and Connacht/Ulster but down in Munster.

Munster households aside, consumers were generally more upbeat about the economy and their own finances this month. Firms were more subdued about near-term prospects however, especially for business activity. On the housing front, price expectations remained in firm positive territory countrywide, though readings were slightly softer in June in all regions apart from the Rest of Leinster.

Three month moving averages:

  • Dublin Pulse = 97.1 + 2.7 points on the previous survey;
  • Rest of Leinster = 90.5 + 0.4 points;
  • Munster = 90.8 – 2.2 points;
  • Connacht/Ulster = 92.1 + 0.1 points.

About the Bank of Ireland Economic Pulse:

The Bank of Ireland Economic Pulse survey is conducted in conjunction with the European Commission, with the data 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