Business resurgence in first half of 2018 helps BoI Economic Pulse hit a two year high

  • Consumer mood upbeat over summer months
  • Three in four expect house prices to increase in the coming year
  • Rising house prices and cost of renting top of the worry list for younger households

The Bank of Ireland Economic Pulse came in at 98.1 in June 2018. The index, which combines the results of the Consumer and Business Pulses, is 6.3 higher than a year ago.

Sentiment among households was broadly unchanged this month and remains upbeat, while the Business Pulse posted a two year high. Concerns about the stuttering Brexit talks, political developments in Europe and potential disruptions to global trade have come to a head in recent weeks though and may muddy the waters going forward, with a number of firms more circumspect about near-term prospects for business activity this month than in May.

Discussing the latest Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist, Bank of Ireland said: “The Economic Pulse has had a good run over the first half of 2018, averaging 95.9 compared with 92.7 in the same period of last year. Consumer confidence has moved sideways in recent months but remains at a high level, while business confidence has strengthened noticeably and is now at a two year high. The strong domestic economy is providing support and the global economy is also expanding. Recent developments externally could put a dent in the mood though.

“On the Brexit front, the latest border backstop proposal from the UK Government has not passed muster with EU leaders and little progress is expected at the upcoming summit. The political situation in Italy has roiled markets of late, while the US administration has decided to go ahead with tariffs on steel and aluminium imports from the EU, Canada and Mexico, who have said they will retaliate. With Trump threatening further trade tariffs following an acrimonious conclusion to the G7 meeting, a tit-for-tat escalation is possible.

“Indeed, a number of firms were more circumspect about near-term prospects for business activity this month than in May, and we will be closely monitoring the data to see if this is temporary or something more.”

Consumer Pulse

The Consumer Pulse stood at 98.9 in June 2018. Households’ assessment of the economy and their own finances was little changed on the month, resulting in a sideways move in the headline index. However, compared to last year it was up 2.5. The buying climate improved this month, with four in ten considering it a good time to purchase big ticket items such as furniture and electrical goods, compared with 36% in May. The survey results show that households are keeping an eye on their savings as well and that seven in ten are likely to put some money aside over the coming year.

Business Pulse

At 97.9 in June 2018, the Business Pulse was up 0.7 on last month and 7.2 higher than this time last year. The picture was somewhat mixed, with the Retail and Construction Pulses up on the month but the Industry and Services Pulses down. Firms in all four sectors were more positive about business activity over the past while, but against the backdrop of increased political and policy uncertainty on the global stage, there was a general scaling back of expectations for the coming 3 months (and of hiring intentions in the case of industry and services). The Business Pulse has put in a good performance in the first half of the year though and is now at a two year high.

Housing Pulse

The Housing Pulse gave up some ground this month, coming in at 113.8. This was down 2.8 on last month but broadly unchanged on a year ago. Expectations remain in firm positive territory however, with three quarters (76%) of survey respondents expecting house prices to increase in the next 12 months and 73% expecting rents to go up. Rising prices and the cost of renting are at the top of the worry list for younger households and may be influencing the higher incidence of savings among this cohort – almost nine in ten 16-29 year olds are planning on putting money aside in the next 12 months.

Regional Pulse

The Bank of Ireland Regional Pulses combine the views of households and firms around the country. The 3 month moving averages show that sentiment was up on the month in Munster, flat in the Rest of Leinster but down in Dublin and Connacht/Ulster in June 2018.

Three month moving averages:

  • Dublin Pulse = 98.3 – 1.7 points on the previous reading;
  • Rest of Leinster = 94.5 + 0.1 points on the previous reading;
  • Munster = 98.6 + 2.9 points on the previous reading;
  • Connacht/Ulster = 91.6 – 1.1 points on the previous reading.

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.