Positive start to 2020 for Bank of Ireland Economic Pulse
Economic Pulse rises in January
Households more upbeat and Business confidence also firmer
Two in five businesses plan to increase basic wages in the next 12 months
The Bank of Ireland Economic Pulse came in at 86.1 in January 2020. The index, which combines the results of the Consumer and Business Pulses, was up 3.1 on last month but 1.8 lower than a year ago.
Both households and firms have put Brexit on the back burner. Almost half of workers are expecting a larger pay packet over the coming year, with households more upbeat about their own finances as well as the economy. The Business Pulse rose as some of the fog surrounding the Brexit process lifted. With the pound rallying against the euro and global trade tensions also easing, firms in industry and services expect their export order books to strengthen in the period ahead.
While the UK is set to leave the EU on January 31st, the Conservative Party’s decisive election win has paved the way for an orderly exit on the basis of Prime Minister Johnson’s revised Withdrawal Agreement, as opposed to a crash out departure. A ‘status quo’ transition period will apply until the end of 2020, providing some breathing space and helping to lift spirits at the start of the New Year.
Commenting on Bank of Ireland’s January Economic Pulse research, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “The Economic Pulse started the New Year on a positive note, with consumer and business sentiment both rising in January. The survey findings suggest that households and firms have put Brexit on the back burner for now but as the negotiations about the new relationship between the UK and the EU are just getting going, it is really only the end of the beginning. Reflecting this, sentiment is below where it was a year ago and remains well off pre-referendum highs.”
- “The mood among households took a turn for the better this month.”
- Consumer Pulse jumps in January
- Buying climate improves
- 47% of workers expecting a pay rise
At 82.7 in January 2020, the Consumer Pulse was up 6.3 on last month but down 5.0 on a year ago. While seasonal effects were at play this month – as they usually are in January – a no deal Brexit was avoided, and with almost half of workers expecting a healthier pay packet over the coming year, households were more upbeat about the economy and their own finances. The post-Christmas sales also contributed to an improvement in the buying climate – some 34% considered it a good time to purchase big ticket items like furniture and electrical goods compared to 31% in December.
- “Having picked up in November and December, the Housing Pulse reversed course this month.”
- Housing Pulse down in January
- 75% think it is cheaper to buy than rent in their area
- 27% to spend on home improvements in the next 12 months
The Housing Pulse stood at 78.3 in January 2020, down 6.2 on last month’s reading. Households in all regions pared back their expectations for future house price gains this month, though the balance of positive and negative responses remained in the black across the board. The data also shows that one in ten is planning on buying or building a property in the coming year. This month’s survey was carried out before the general election campaign got underway so it remains to be seen what impact the political parties’ policy proposals have on price expectations and housing demand.
- ”With the economy effectively at ‘full employment’ wage increases are on the cards for many in 2020”.
- Business Pulse up in January
- 43% of firms expect to increase pay
- Three in five on a growth trajectory
The Business Pulse came in at 86.9 in January 2020, up 2.4 on December’s reading but down 1.1 on a year ago. The four sectoral Pulses rose this month as some of the fog surrounding the Brexit process lifted. The pound has also rallied against the euro and with global trade tensions easing as well, firms in industry and services expect their export order books to strengthen in the period ahead. On the pay front, the January survey finds that just over two in five businesses are planning on increasing basic wages in the next 12 months – to the tune of 3.6% on average – while on the growth front, three in five have ambitions to expand in the next 1 to 3 years.
The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The results for January 2020 (3 month moving average basis) show that sentiment was up on the month in all four regions.
- Dublin Pulse = 89.5 : +4.0 points on the previous survey;
- Rest of Leinster = 78.8 : +0.6;
- Munster = 80.0 : +4.1;
- Connacht/Ulster = 81.3 : +1.8 points.