Bank of Ireland Economic Pulse down in March

With political drama in Westminster dominating the headlines, Brexit worries come through strongly in this month’s economic sentiment tracker.

  • Sentiment in all business sectors takes a hit but investment still on the cards
  • Consumer confidence up a notch – though households remain jittery
  • Housing Pulse at lowest point in the series’ history

25 March 2019 – The Bank of Ireland Economic Pulse came in at 89.4 in March 2019. The index, which combines the results of the Consumer and Business Pulses, was down 1.4 on last month and 7.7 on a year ago.

With a raft of votes in London and 11th hour talks in Brussels – along with the Irish Government ramping up its ‘no deal’ preparations – Brexit has continued to make waves and temper the mood. Sentiment was down across all business sectors this month, with households also remaining jittery about the outlook for the economy.

Commenting on Bank of Ireland’s March Economic Pulse research, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said:

“The Economic Pulse was down in March, with uncertainty around how and when the UK is going to leave the EU tempering the mood. It has been a tumultuous few weeks and with the political drama in Westminster dominating the headlines and events coming down to the wire, it is no surprise that Brexit worries come through strongly in this month’s survey results.”

Business Pulse

While investment is on the cards for this year, Brexit-related uncertainty has led some firms to adopt a ‘wait and see’ approach to decisions.

  • Business Pulse down in March
  • Broad based easing
  • Three in ten firms to invest more in 2019 – replacing and maintaining plant and equipment the main area of focus

At 91.1 in March 2019, the Business Pulse was down 2.1 on last month and 5.7 lower than a year ago. All four sector Pulses lost ground this month, with firms in industry, services and construction reporting softer order books and retailers taking a dim view of the recent trading period.

This month’s research also looked at firms’ plans for investment and finds that three in ten businesses expect to increase their investment spending this year compared to last year, with replacing and maintaining plant and equipment the main area of focus.

Uncertainty remains a drag and with clarity on the Brexit front still lacking, 58% of Irish firms impacted by the UK’s decision to leave the EU indicated that they have pressed the pause button on their investment plans for 2019.

Dr. Loretta O’Sullivan said; “A range of factors were mentioned as having an impact on businesses’ investment plans. Demand from customers is generally seen as supportive, as are financial conditions and technical factors. Uncertainty is a constraint though, with Brexit trumping US policies in the uncertainty stakes. Almost three in five Irish businesses impacted by Brexit indicated that they have put their investment plans for this year on hold, compared to one in six impacted by the latter.”

Consumer Pulse

Having posted a series low last month, the Consumer Pulse was a touch higher this month but remains at a low ebb.

  • Consumer Pulse up a notch in March – households worried about the economic outlook though
  • Three in four likely to save in the next 12 months
  • 33% think it is a good time to buy big ticket items

The Consumer Pulse stood at 82.6 in March 2019, up 1.5 on last month but down 15.8 on a year ago. Positive developments on the jobs and earnings fronts buoyed households a bit this month. Their assessment of the economy’s prospects for the coming year was little changed however, with the balance of positive and negative responses remaining firmly in the red amid ongoing Brexit uncertainty.

“This uncertainty may also be contributing to households’ increasing propensity to save with three in four indicating that they are likely to put some money aside in the next 12 months, up from 70% a year ago,” Dr. Loretta O’Sullivan said.

Housing Pulse

The Housing Pulse took another dip this month, with the March reading marking a fresh low for the series.

  • Housing Pulse softer in March
  • Lowest print to date
  • Two in three still expect prices to rise over the next 12 months

The Housing Pulse came in at 97.7 in March 2019, down 2.1 on last month. With the Central Bank’s mortgage rules and increasing supply continuing to take some of the edge off the market, a general cooling in house price expectations and an easing in the annual rate of house price inflation have been evident over the past while.

Demographics, job gains and earnings growth remain supportive though, and with the number of units coming on stream still well shy of what is needed, 64% of households think house prices will increase in the next 12 months.

Regional Pulse

The Bank of Ireland Regional Pulses combine the views of households and firms around the country. The readings for March (3 month moving average basis) show that sentiment was down in Munster, broadly unchanged in the Rest of Leinster and up in Dublin and Connacht/Ulster.

Three month moving averages:

  • Dublin Pulse = 90.6 +1.4 points on the previous reading;
  • Rest of Leinster = 89.3 -0.4 points on the previous reading;
  • Munster = 89.1 -1.0 points on the previous reading;
  • Connacht/Ulster = 88.3 +1.6 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.