Economic Pulse Rises in February; Business Mood Improves as COVID Uncertainty Recedes

  • Over half of firms expect business activity to increase in coming months
  • Housing Pulse posts highest reading since series began in 2016
  • Consumers a little more hesitant

The Bank of Ireland Economic Pulse came in at 88.1 in February 2022. The index, which combines the results of the Consumer and Business Pulses, was up 3.6 on January and 19.5 higher than a year ago.

Reduced COVID uncertainty and the increased cost of living provided the backdrop to February’s survey, with the former helping to bolster the business mood whereas the latter served to temper consumer sentiment. Geopolitical tensions were also at play but the fieldwork for the February research was carried out before the Russian – Ukraine conflict escalated.

Commenting on the February Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “It’s encouraging to see the Economic Pulse up for a second consecutive month in 2022 and also back above its pre-pandemic reading.

Firms sounded a brighter note about the outlook in February, with over half (55%) saying they expect their business activity to increase in the period ahead (up from two in five in January). Households were a little more hesitant however as their finances feel the pinch from higher inflation. Energy prices in particular have risen sharply in recent months, with the clear possibility of a further spike given recent developments in the Russian – Ukraine crisis.

The latest research also took a look at infrastructure priorities from a business perspective and finds that investment in housing tops the list, not least because affordable accommodation will be important in attracting workers from abroad to help address labour shortages in some sectors.”

Business Pulse

“The Business Pulse was up for a second month running in February as the COVID fog continued to lift.”

  • Business Pulse increases in February as firms see brighter outlook
  • Non-labour input costs up for almost four in five

The Business Pulse stood at 92.4 in February 2022, up 5.3 on January’s reading and 23.4 on a year ago. The Industry, Services and Construction Pulses gained ground in February, while the Retail Pulse was little changed after bouncing in January. With public health restrictions more or less fully removed, firms in all four sectors were more upbeat about near-term prospects for business activity, albeit elevated costs remain a concern.

On the infrastructure front, the February scorecard was mixed – firms were generally satisfied with the basics like water, waste and energy, but 37% called for further investment in housing in order to strengthen local economies and the business environment, and around a quarter felt that more needs to be done in each of the telecommunications and transport areas.

  • Industry Pulse = 96.2 +5.8 points on the previous survey;
  • Services Pulse = 89.9 +5.1;
  • Retail Pulse = 89.9 -0.3;
  • Construction Pulse = 107.0 +15.8.

Consumer Pulse

“There was an element of payback in February, with the Consumer Pulse slipping after making a solid gain in January.”

  • Consumer Pulse dips in February as households in circumspect mood
  • One in five still considers it a good time to buy big ticket items

At 71.2 in February 2022, the Consumer Pulse was down 2.9 when compared with January, but 4.0 higher than a year ago. While the lifting of virtually all public health restrictions was seen as a positive for the labour market – one in two now expects unemployment to fall over the coming year – cost of living worries prompted households to downgrade their assessment of the economy and their own financial situation. Annual consumer price inflation is currently running around the 5% mark and squeezing purchasing power, though new Government measures to mitigate high energy costs will provide some relief.

Housing Pulse

“The Housing Pulse strengthened in February, posting its highest reading since the series began in 2016.”

  • Housing Pulse jumps in February, hitting a new peak
  • 84% of households think house prices will rise in the next 12 months

The Housing Pulse came in at 122.9 in February 2022. This was 8.7 above January’s print and 29.6 higher than a year ago. Households in all regions upped their expectations for future house price gains in February, with those in the Rest of Leinster and Munster leading the way. The world of work was upended by the pandemic and while a ‘return to the office’ is underway, legislation giving employees the right to request remote working means that some people may decide to relocate outside of Dublin. Absent sufficient supply, additional demand will put upward pressure on house prices in other parts of the country however.

Regional Pulse

The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The results for February 2022 (3 month moving average basis) show that sentiment was down slightly in Dublin but up in the Rest of Leinster, Munster and Connacht/Ulster.

Three month moving averages:

  • Dublin Pulse = 87.0 -0.8 points on the previous survey;
  • Rest of Leinster = 82.1 +1.7;
  • Munster = 81.9 +2.1;
  • Connacht/Ulster = 87.9 +2.4.