Sentiment sours among consumers in June; mixed picture for businesses

  • Economic Pulse falls in June
  • One third of households say they are ‘just making ends meet’
  • Industry, Retail and Construction Pulses rose in June, while Services Pulse dropped

The Bank of Ireland Economic Pulse came in at 78.8 in June 2022. The index, which combines the results of the Consumer and Business Pulses, was down 3.9 on last month and 11.0 lower than a year ago.

Brussels, Frankfurt and London have taken centre stage in recent weeks, with the European Union announcing a ban on most Russian oil imports to the bloc, the European Central Bank flagging an imminent tightening of monetary policy, and the UK government planning action to override much of the Northern Ireland Protocol. These developments re-ignited households’ fears for the economy, while the post-restrictions rebound in some consumer-facing services sectors faltered a little this month amid cost of living woes.

Commenting on the June Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “Global markets have been volatile lately as energy sanctions on Russia have been broadened and as the major central banks up the ante in their fight against inflation. Irish households have been jumpy too, with the Consumer Pulse backpedalling in June after rallying in May. Looming interest rate hikes mean higher mortgage bills for some households and contributed to some slippage in the Housing Pulse this month. But with supply continuing to lag demand, three in four expect house prices to increase over the coming year. June also saw the Business Pulse dip below its pre-pandemic level for the first time in 2022. This was due to an easing in the services component of the index, which has been benefitting from the lifting of the public health restrictions.”   

Consumer Pulse

“Last month’s rally proved to be short-lived, with the Consumer Pulse backpedalling in June.” 

  • Consumer Pulse down in June
  • Households gloomier about the economy
  • Income squeeze

The Consumer Pulse stood at 51.3 in June 2022, down 4.1 on May and 24.8 lower than a year ago. The series posted its joint second lowest reading this month, with households taking a more downbeat view of the economy in particular. And as consumer price inflation has accelerated, so has the share of households reporting that they are ‘just making ends meet’. This stood at a third in June’s survey (up from a quarter at the start of the year), albeit with some dispersion – the figure for those at the lower end of the income distribution was 51% versus 14% at the upper end.

Business Pulse

“June saw the Business Pulse dip below its pre-pandemic level for the first time this year.”

  • Business Pulse declines in June
  • Mixed sectoral readings
  • Selling price expectations ease again

The Business Pulse stood at 85.6 in June 2022, 3.9 lower than in May and 7.5 lower than a year ago. The Industry, Retail and Construction Pulses actually rose this month but a drop in the Services Pulse – after a solid five-month run of gains – pulled the overall index down. The backdrop for firms in general remains challenging, with three in five finding it difficult to predict the future development of their business situation at present. On the costs and pricing fronts, the share reporting an increase in non-labour input costs over the past three months was stable in June (although still elevated at 87%), while the share expecting to up their selling prices in the near term eased for a second month running (to 62%).

  • Industry Pulse = 93.0 (+5.7 points on the previous survey)
  • Services Pulse = 84.9 (-8.6)
  • Retail Pulse = 82.8 (+2.9)
  • Construction Pulse = 83.9 (+0.7)

Housing Pulse

“The Housing Pulse softened this month as the ECB signalled a summer ‘lift-off’ for interest rates.”

  • Housing Pulse slips in June
  • Higher borrowing costs ahead
  • House price expectations remain positive 

The Housing Pulse lost ground for a second consecutive month in June 2022. At 110.7, the index was 4.9 lower than last month and down 5.6 on a year ago. With the European Central Bank announcing that it will raise interest rates in July and again in September – by 0.25 percentage points in the first instance and at least that much in the second – households were more circumspect about prospects for house prices this month. While 74% still expect growth over the coming year, this was down from 79% in May, with Dublin and Connacht/Ulster leading the move lower.

Regional Pulse

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 down in Dublin and Munster, more or less flat in the Rest of Leinster and up in Connacht/Ulster in the April to June period compared with the March to May period.

Three month moving averages:

  • Dublin Pulse = 88.5 (-4.8 points on the previous survey)
  • Rest of Leinster = 74.6 (-0.1)
  • Munster = 81.1 (-2.8)
  • Connacht/Ulster = 79.6 (+1.3)