Business Sentiment Slips as Economic Reopening Stalls
- Business Pulse softer in August following recent gains
- Consumer Pulse also down as households fret about the economy
- Housing Pulse bucks trend by rising
The Bank of Ireland Economic Pulse stood at 59.3 in August 2020. The index, which combines the results of the Consumer and Business Pulses, was down 2.5 on last month and 19.8 lower than a year ago.
This month’s drop comes after three straight monthly increases, and follows on from renewed concerns about COVID-19 spikes and some setbacks in re-opening the economy. Consumer and business confidence both took a dip in August; though the index remained well above the 34.3 reading it posted in April at the height of the COVID-19 disruption.
The Business Pulse eased back in August following three consecutive monthly rises as progress made in fully reopening the economy stalled, whereas this month’s Housing Pulse bucked the downward trend with the share of households expecting house prices to rise over the coming year tracking higher.
Commenting on the August Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “The dip in the Economic Pulse this month is not all that surprising given the unsettled backdrop lately. The rise in virus cases at home and overseas has rattled nerves, while the rebooting of the economy has hit some speed bumps with the re-opening of ‘wet’ pubs pushed out, confusion over the travel Green List and the imposition of local lockdowns in three counties.
“There is a growing sense emerging nationally that things may be somewhat ‘stop-start’ over the coming months. This emphasises the importance of clear communication on the direction of public health and economic policy, which should serve to lessen the uncertainty facing households and firms.”
“Having risen for three consecutive months, the Business Pulse dropped slightly in August.”
- Business Pulse drops in August
- Failure to move to Phase 4 dampens mood
- Fears of local lockdowns
The Business Pulse stood at 60.9 in August 2020, down 2.5 on last month and 19.0 lower than a year ago. While firms reported an improvement in trading conditions over the past three months, and the stimulus package announced by the Government in late July included a range of supports for businesses, the failure to green-light phase 4 of the re-opening roadmap put a dent in the mood. This was dented further following the introduction of local lockdowns in Kildare, Laois and Offaly and fears that similar steps might be taken elsewhere, with firms paring back their expectations for activity over the coming three months. The August survey also points to some pick-up in non-labour input costs in the recent period, though most businesses expect to keep their near-term selling prices the same.
“Households remained on edge this month, with concerns about the economy in particular persisting.”
- Consumer Pulse dips in August
- Fresh low for the series
- Buying sentiment also weaker than in July
At 52.9 in August 2020, the Consumer Pulse was down 2.6 on last month and 23.1 lower than a year ago. Households were more subdued about their current financial situation this month, and with the incidence of virus cases increasing and the move to phase 4 of the re-opening roadmap deferred, they were gloomier about the economy too (especially in the Rest of Leinster where restrictions have been re-imposed on counties Kildare, Laois and Offaly). Buying sentiment also softened in August, with 21% considering it a good time to purchase big ticket items like furniture and electrical goods compared with 26% in July.
“The increase in the Housing Pulse this month bucked the broader trend of softening sentiment.”
- Housing Pulse up in August
- Three in ten think house prices will rise in the next 12 months
- Two in five expect rents to increase
The Housing Pulse gained further ground in August 2020, coming in at 58.2. This was up 7.8 on last month’s reading – bucking the broader trend – but was down 23.8 on a year ago. The share of households expecting house prices to rise over the coming year ticked up to three in ten this month (from a quarter in July), while the share anticipating a fall edged lower (to 32% from 37%), leaving the balance of positive and negative responses only marginally in the red. On the rental front, expectations stayed in positive territory in August.
The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The indices are calculated on a 3 month moving average basis and show that sentiment was up across the board in the June to August period compared with the May to July period.
The standalone monthly reading for the Rest of Leinster Pulse shows a sizeable drop in confidence in August though, following the re-imposition of restrictions in counties Kildare, Laois and Offaly.
Three month moving averages:
|Pulse Area||Current Points||Points increase/decrease on previous survey|
|Rest of Leinster||62.3||+3.1|