2018 ends on a soft note with both consumer and business sentiment down in December
- Second lowest reading in series’ history
- Consumer and Business Pulses give up ground
- Households more downbeat about the economy this month
- Brexit uncertainty a drag
The Bank of Ireland Economic Pulse stood at 88.3 in December 2018. The index, which combines the results of the Consumer and Business Pulses, was down 1.6 on last month and 0.6 lower than a year ago.
2018 was a year of two halves, with consumer confidence high and business sentiment strengthening in the opening months buoyed by the expanding domestic and global economies, but reversing course in the closing months amid heightened international trade tensions and Brexit uncertainty. On the latter, a draft deal is now on the table but as it will be difficult to get it through the UK Parliament, it failed to lift the mood in December.
Commenting on Bank of Ireland’s December Economic Pulse research, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “The Economic Pulse ended the year on a soft note, with both consumer and business confidence down in December. This month’s reading is the second lowest in the series’ history and stands in marked contrast to the two-year high that the index posted back in June.
“While metrics like solid GDP growth and the low unemployment rate indicate that the Irish economy is performing well, we expected global trade tensions and Brexit uncertainty to temper the mood among households and firms in the second half of the year and this has proved to be the case. Looking ahead to 2019, the Economic Pulse will continue to track the impact on sentiment of economic and political developments at home and overseas.”
- Consumer Pulse dips in December
- Households more cautious about the economy
- And their own financial prospects
The Consumer Pulse came in at 89.3 in December 2018. This was down 0.9 on November’s reading and 5.4 lower than this time last year. With the Brexit situation far from settled, households were more downbeat about the economy this month and also pared back their expectations for their own financial situation. The buying and savings climate held steady though. 36% considered December a good time to purchase big ticket items like furniture and electrical goods, while seven in ten indicated that they are likely to put some money aside over the next 12 months.
- Drop in Housing Pulse in December
- House price expectations softer in all regions bar Munster
- But remain in positive territory
At 100.8 in December 2018, the Housing Pulse was down 4.3 on last month. The data show that two in three households think house prices will rise over the coming year, compared with seven in ten last month. The Central Bank announced the outcome of its annual review of the mortgage rules in late November. It made no change but to the extent that some households view the measures as a constraint on demand, the decision to maintain the status quo may have partly contributed to the renewed cooling in price expectations this month.
- Business Pulse softer in December
- Brexit uncertainty weighing on sentiment
- And firms’ investment decisions
The Business Pulse posted a reading of 88.1 in December 2018, down 1.8 on last month. The picture was mixed across the sectors this month but relatively muted on the whole; with the Industry and Retail Pulses easing back, the Services Pulse more or less flat and the Construction Pulse up a touch (the latter was the only sectoral Pulse to finish the year above where it started it). Brexit developments have been buffeting business sentiment since the summer and, with things still up in the air and the November survey finding that half of Irish firms impacted by the UK’s decision to leave the EU have put their investment plans for next year on hold, it looks like they will continue to do so into the New Year.
The Bank of Ireland Regional Pulses combine the views of households and firms around the country. The results for December 2018 (3 month moving average basis) show that sentiment was down on the month in all four regions.
Three month moving averages:
- Dublin Pulse = 92.3 -3.4 points on the previous reading;
- Rest of Leinster = 91.5 -1.0 points on the previous reading;
- Munster = 89.3 -0.8 points on the previous reading;
- Connacht/Ulster = 85.1 -0.4 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.