Two in three households planning to spend the same or more on holidays this year
- Business sentiment catching up with Consumer sentiment
- Accommodation and food sectors positive about prospects for summer season
- Four in ten concerned about rising house prices and same proportion worried about cost of renting
- House prices growing strongly, with Housing Pulse indicating more is to come
The Bank of Ireland Economic Pulse strengthened in May 2018, coming in at 97.6. The index, which combines the results of the Consumer and Business Pulses, was up 2.7 on April’s reading and 5.1 on a year ago. Households were in a more upbeat mood this month and there was also an improvement in business sentiment, which is at a 23 month high.
The research points to a good summer. Two in three households are planning to spend the same or more on holidays this year and firms in the accommodation and food sectors are positive about their prospects for the season.
Discussing the Economic Pulse, Dr. Loretta O’Sullivan, Group Chief Economist, Bank of Ireland said: “With everyone embracing summer, the Economic Pulse rose in May. This time last year, we saw a divergence starting to emerge between households and firms. Consumer confidence forged ahead in the following months but business sentiment remained subdued. 12 months on and it looks like less a case of ‘mind the gap’ and more a case of ‘closing the gap’. The Business Pulse has rallied this year and is currently at a 23 month high. Brexit uncertainty and geopolitical tensions aside, the Irish and global economies are doing well which has helped things and the gap between consumer and business sentiment now looks to be narrowing.”
Dr. Loretta O’Sullivan commented: “Summer is here and with spirits lifting, two in three households are planning on spending the same or more on holidays this year compared with last year. Firms in the accommodation and food sectors are also positive about prospects for the season and more so than they were this time last year. With the World Cup and a plethora of festivals and other events on the agenda, it is gearing up to be a busy period all round.”
At 99.2 in May 2018, the Consumer Pulse was up 1.4 on last month and 5.1 higher than a year ago. Households were a little more upbeat about the current economic situation this month, and also took a more positive view of their existing financial position. On the buying front, 36% considered May a good time to purchase big ticket items like furniture and electrical goods, while just over a quarter expect to increase the amount they spend instore in the next 12 months and one in five expects to ramp up spending done online.
The Business Pulse stood at 97.2 in May 2018, a 23 month high and showing an improvement in sentiment across sectors. This was up 3.0 on April’s reading and 5.1 higher than this time last year. Helped by improving order books, the Industry, Services and Construction Pulses all gained ground this month, while the Retail Pulse was little changed. The May data also point to growing inflationary pressures, related in part to rising oil prices and recent exchange rate developments. 52% of firms in industry and 40% in services reported an increase in non-labour input costs over the past three months for example; well up on the April responses of 44% and 36% respectively. Most businesses still expect to keep their selling prices unchanged in the period ahead though.
Dr. Loretta O’Sullivan commented: “Input costs were a talking point in May. The survey findings point to growing inflationary pressures with more firms reporting an increase in non-labour costs over the past three months. One of the factors behind this is higher oil prices, another is currency moves. Amid continuing geopolitical tensions including the decision by the US to withdraw from the Iran nuclear deal, the price of Brent oil is now running at a 3½ year high of $78 per barrel. Also, the euro has come off the boil recently, particularly against the dollar, reflecting more moderate growth in the Euro area and political developments in Italy.”
The Housing Pulse rose to 116.6 in May 2018 from 116.1 last month. While new homes are being built, supply is failing to keep pace with demand. This is putting upward pressure on house prices and fuelling expectations of further gains. This is the case throughout the country, with almost nine in ten households in Dublin, around four in five in the Rest of Leinster and Munster and two in three in Connacht/Ulster expecting prices to increase in the next 12 months. The survey results also show that rent expectations were in firm positive territory in all regions in May. Some four in ten (38%) are concerned about rising house prices with the same proportion (42%) worried about the cost of renting.
“CSO figures indicate that house prices are growing strongly, with the Housing Pulse suggesting that there is more to come. The latest data from the CSO show house price inflation is currently in double digit territory. Prices were up 12.1% in the year to March in Dublin and rose by 13.4% elsewhere. Our Pulse research finds that most households in the capital and around the country are expecting further price increases in the coming year, which isn’t surprising given that the market remains in a state of disequilibrium with supply well short of demand.” Dr. Loretta O’Sullivan said.
The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The results for May 2018 (3 month moving average basis) show that sentiment was flat in the Rest of Leinster and Munster but up on the month in Dublin and Connacht/Ulster.
- Dublin Pulse = 100.0 + 0.6 points on the previous survey
- Rest of Leinster = 94.4 no change
- Munster = 95.6 no change
- Connacht/Ulster = 92.7 + 2.9 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 approximately 2,000 businesses on a range of topics including the economy, their financial situation, spending plans, house price expectations and business activity.