Economic Pulse Falls Again In December As Omicron Fears Lead To Drops In Consumer and Business Confidence
- Economic Pulse registers its worst reading in nine months
- Experience economy bearing the brunt of the new restrictions
- Four in five households think house prices will rise next year
The Bank of Ireland Economic Pulse came in at 79.9 in December 2021. The index, which combines the results of the Consumer and Business Pulses, was down 3.4 on last month but up 9.7 on a year ago.
With high case numbers and the new Omicron variant of COVID-19 leading to a fresh raft of public health restrictions – mainly impacting hospitality and entertainment – and the possibility of more to come, households and firms were on edge this month. Both consumer and business sentiment headed south in December, while the headline Economic Pulse posted its lowest reading in nine months.
Commenting on the December Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “The Economic Pulse ended 2021 on a soft note as Omicron woes added to the Delta blues. Consumer and business confidence dropped again this month as the Government ramped up measures to curb the spread of COVID-19 and people reduced their social activity.
Uncertainty about the path of the virus and whether further mitigating actions will need to be taken also contributed to the broad-based nervousness evident in December’s survey results, with households worried about the economy and firms worried about business activity. Looking ahead to 2022, pandemic headwinds are likely to be a feature of the January data too, though the acceleration of the vaccine booster campaign should start to pay some dividends as we move into the New Year.”
“The Business Pulse lost ground for a second consecutive month in December.”
- Business Pulse down in December
- Heightened COVID uncertainty and general nervousness among firms
The Business Pulse stood at 82.4 in December 2021, down 2.9 on last month but 11.2 higher than a year ago. The deteriorating public health situation provided an unsettled backdrop this month and all four sectoral Pulses fell further. But with the experience economy very much in the eye of the COVID storm, the Services index came in quite a bit below the Industry, Retail and Construction indices.
While the virus was clearly on the business radar in December, supply disruption is still an issue and is continuing to have spill-over effects – three in four firms reported increases in non-labour input costs over the past three months, while 55% said that they are likely to hike their selling prices in the period ahead.
- Industry Pulse = 86.7 -6.1 points on the previous survey;
- Services Pulse = 79.8 -2.0;
- Retail Pulse = 82.6 -0.9;
- Construction Pulse = 92.1 -6.7.
“The drop in December made it a hat-trick of declines for the Consumer Pulse.”
- Consumer Pulse drops in December
- Concerns about the economy and jobs to the fore for households
At 69.9 in December 2021, the Consumer Pulse was down 5.3 on last month but 3.6 higher than a year ago. Households were gloomier about the economic situation this month, with their assessment of the labour market also taking a turn for the worse amid rising virus cases and new restrictions – the share expecting unemployment to increase in the coming year (41%) is now greater than the share expecting a fall (36%). On a more positive note, buying sentiment was steady on the month, though it remains down when compared with the summer as households’ finances feel the pinch from higher inflation.
“The Housing Pulse bucked the wider trend, nudging slightly upwards this month.”
- Housing Pulse up in December
- House price expectations firmly in positive territory, same for rents
The Housing Pulse came in at 117.5 in December 2021, up 1.0 on last month’s reading and 35.5 higher than a year ago. With strong demand for accommodation pushing up against insufficient supply, four in five households think house prices will rise next year and seven in ten think rents will go up. While new homes are coming on stream, pandemic and post-Brexit related bottlenecks are impacting construction output, with some three in five builders on the residential side struggling with material and equipment shortages and over two in five facing labour shortfalls.
The Bank of Ireland Regional Pulses bring together the views of households and firms from around the country. The results for December 2021 (3 month moving average basis) show that sentiment was down across the board.
Three month moving averages:
- Dublin Pulse = 91.0 -3.2 points on the previous survey;
- Rest of Leinster = 80.2 -3.4;
- Munster = 81.6 -1.5;
- Connacht/Ulster = 85.3 -3.0.