The Bank of Ireland Economic Pulse came in at 95.1 in April 2017. The index, which combines the results of the Consumer and Business Pulses, was up 4 on last month but down 0.9 on this time last year.
While the unsettled external environment and Brexit in particular remains a worry, households and firms appear to have taken the triggering of Article 50 – and also the recent industrial unrest at home - in their stride. Both consumer and business sentiment picked up this month, and the Economic Pulse registered its highest reading since the UK’s decision to leave the EU.
Discussing the Economic Pulse, Dr. Loretta O’Sullivan, Group Chief Economist, Bank of Ireland said: “This month’s Economic Pulse reading is the highest since the UK voted to leave the EU, though it is still lower than pre-Brexit levels. Households and firms were more upbeat in April and seem to have shrugged off the triggering of Article 50 and the industrial unrest at home. We are heading into a couple of interesting months with the withdrawal negotiations getting underway and elections across Europe. So it may be a case of time will tell whether the improvement in sentiment this month is temporary or if it will be sustained.”
The Consumer Pulse rose for a second month running in April 2017, to 94.2. This was up 1.6 on March’s reading but down 1.4 on a year ago. Households took a more positive view of the economy this month and, with the Budget 2017 increases in pension and other social welfare payments kicking in, were also more upbeat about their current financial situation. Buying sentiment improved in the month as well, with over one third (38%) considering it a good time to purchase big ticket items such as furniture and electrical goods. Meanwhile just over one in four is likely to buy a car in the next year.
Dr. Loretta O’Sullivan said: “27% are likely to buy a car in the next 12 months, though in line with the recent trend some of these purchases may be used car imports rather than new sales. The weakness of the pound has been an important factor behind this changing pattern. Sterling fell sharply in the wake of the Brexit vote and after the Bank of England eased monetary policy in August, but has gained some ground recently following Prime Minister May’s decision to call a snap general election. And with the UK-EU negotiations set to get underway during the summer, some further volatility is likely. ”
At 95.3 in April 2017, the Business Pulse was up 4.6 on March though down 0.7 on this time last year. The services sector particularly medium and larger firms led the way this month. The Industry and Retail Pulses also increased, while the Construction Pulse was broadly unchanged.
The April survey also finds that the majority of firms are on a growth trajectory, with two in three having ambitions to expand their businesses in the next 1 to 3 years. This is unchanged from January when this question was last asked but, reflecting the general air of uncertainty in the wake of the UK’s decision to leave the EU and the US Presidential election outcome, is down from three in four in January 2016.
Dr Loretta O’ Sullivan said: “On the wage front, 41% of firms in industry, 33% in the services and construction sectors, and 28% of retailers expect to increase basic pay in the next 12 months.”
The Housing Pulse stood at 116.2 in April 2017. The share of respondents expecting future price gains in excess of 5% jumped from 32% in March to 39% this month, which helped take the series to a new record high. Sentiment was particularly strong in Dublin, with more than half confident that prices will rise by more than 5% in the next 12 months (up from 37% last month) and 65% considering now a good time to sell (51% nationally). For some, doing up or renovating an existing property rather than moving is the preferable choice. One in four (27%) indicated that they are likely to spend a large sum of money on home improvements in the coming year.
Dr. Loretta O’Sullivan commented: “We know from CSO data that house prices are on an upward trajectory and all the signs point to further price inflation over the coming months. While the Census shows that the population has increased, housing supply is still well short of demand, and the Housing Pulse which captures future price expectations is at a record high.”
The Bank of Ireland Regional Pulses combine the views of consumers and firms in different parts of the country. The results for April 2017 (3 month moving average basis) show that sentiment was up in Dublin and Connacht/Ulster but down in the Rest of Leinster and Munster.
Taking into account the Budget 2017 increases in pension and other social welfare payments, households were generally more upbeat about their current financial situation this month, particularly in Dublin and Connacht/Ulster. The April survey results also show that 67% in the Rest of Leinster, 64% in Dublin, 61% in Munster and 57% in Connacht/Ulster think it is cheaper to buy a property in their area than rent one. On the business side, near-term prospects for activity and hiring were in positive territory in all regions.
About the Bank of Ireland Economic Pulse:
The Bank of Ireland Economic Pulse survey is conducted in conjunction with the European Commission, with the data feeding into the EU Commission’s Joint Harmonised EU Programme of Business and Consumer Surveys, a Europe-wide sentiment study running since the 1960s. The Economic Pulse surveys are conducted by Ipsos MRBI on behalf of Bank of Ireland with 1,000 households and over 2,000 businesses on a range of topics including the economy, their financial situation, spending plans, house price expectations and business activity.