Bank of Ireland Economic Pulse shows business sentiment static amid ongoing uncertainty
Economic Pulse little changed in June
Consumer confidence firmer
Business sentiment moves sideways
The Bank of Ireland Economic Pulse came in at 90.7 in June 2019. The index, which combines the results of the Consumer and Business Pulses, was up 0.5 on last month’s reading but 7.4 lower than a year ago. With the domestic economy putting in a good performance, households were more upbeat about the ‘here and now’ and their own financial situation this month. But given the increasingly unsettled backdrop in the UK and beyond, some nervousness about the economic outlook was evident among consumers, with firms generally more circumspect about near-term prospects for business activity as well.
Commenting on Bank of Ireland’s June Economic Pulse research, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said:
“Mid-way through 2019 and the Economic Pulse remains relatively soft, with the June reading little
changed on last month. Having nosedived earlier in the year, consumer confidence was a touch firmer this month while business sentiment moved sideways.
“Yesterday marks three years since the UK referendum on EU membership which set Brexit in train. 36 months on and uncertainty about the leaving process and the future trading relationship is still clouding the horizon. Theresa May has now exited stage left and while we don’t know yet who will be entering stage right, leaving without a deal is something most of the Tory Party leadership candidates have raised as a possibility. 2016 also saw the election of Donald Trump as President of the US. His protectionist stance back then was pure rhetoric but has since turned into policy action, making heightened trade tensions a key risk for the global economy.
“While things have been going well at home, the openness of our economy means that the Brexit and Trump curve balls have taken a toll on sentiment. The Economic Pulse, for example, has fallen from 101.5 in June 2016 to 90.7 in June 2019. And over the coming months, good or bad news on these fronts will likely further buffet consumer and business confidence.”
”Households were more upbeat about the ‘here and now’ this month but remain worried about where the economy is going next.”
Consumer Pulse up in June
37% think it is a good time to buy big ticket items
Households cautious about the economic outlook
The Consumer Pulse stood at 90.6 in June 2019, up 1.8 on last month but down 8.3 on a year ago. Households took a more positive view of the current economic situation and their personal finances this month, with buying sentiment also ticking up a notch. Good news on the jobs and earnings fronts – including employment hitting a record high and wage growth continuing apace – looks to have provided some comfort, whereas political developments in the UK and what these might mean for the Brexit process prompted households to downgrade their assessment of the economy’s prospects.
Housing Pulse softer in June
Two thirds expect price increases in the next 12 months
68% think rents will go up
The Housing Pulse resumed its downward trend in June 2019, coming in at 99.4. Households pared back their expectations for future house price gains this month, but with the number of units being completed still lagging the number needed, the balance of responses remained in positive territory in all parts of the country. On the supply side, the June survey finds that over two in five builders are finding it difficult to get workers and that uncertainty – related to Brexit among other things – is also holding back activity.
Commenting on the Housing Pulse, Dr Loretta O’Sullivan said: “Like Brexit, house prices have been back in the headlines lately, partly because the annual rate of increases has eased quite a bit, especially in Dublin. One reason for this is that affordability is more stretched in the capital which makes the Central Bank’s mortgage rules more binding.
Price expectations in Dublin and elsewhere have also cooled over the past while, and our nationwide Housing Pulse tracker dipped again in June. Two in three households still think price increases are on the cards over the next year though. This is partly because the number of units coming on stream remains well shy of the number needed. And with our survey of construction firms finding that a shortage of workers and uncertainty is limiting building activity, this gap isn’t likely to be closed any time soon.”
”It was a sideways move for the Business Pulse this month amid ongoing uncertainty and tensions on the external front.”
Business Pulse broadly unchanged in June
Services Pulse up, but softer readings in other sectors
At 90.7 in June 2019, the Business Pulse was broadly unchanged on the month but down 7.1 on a year ago. The Services Pulse recovered some lost ground this month whereas the other sectoral Pulses posted lower readings. With the global backdrop unsettled and Brexit uncertainty back in the spotlight, industrial and construction firms reported softer order books, while businesses more generally scaled back their expectations for activity over the next three months. The June survey also finds that over two in five firms in the industry, services and retail sectors, and some three in five builders, have seen a rise in non-labour input costs in the past three months. Nonetheless, the majority expect to keep their near-term selling prices the same.
The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The results for June 2019 (3 month moving average basis) show that sentiment was down on the month in Dublin and Connacht/Ulster, more or less flat in the Rest of Leinster and up in Munster.
- Dublin Pulse = 89.1 (- 0.4 points on the previous survey)
- Rest of Leinster = 88.1 (+ 0.1)
- Munster = 92.4 (+ 2.0)
- Connacht/Ulster = 92.1 (- 0.8 points)