• One in three firms planning to increase basic pay in the next 12 months
• Majority of firms remain on growth trajectory, however business sentiment still behind pre-Brexit levels
• Over one in four households to spend on home improvements in the next year
The Bank of Ireland Economic Pulse stood at 94.0 in July 2017. The index, which combines the results of the Consumer and Business Pulses, was up 2.2 on June and 2.8 on this time last year. While the Consumer Pulse was broadly unchanged in July, it has been edging up in recent months and is now at its highest level since the UK’s decision to leave the EU last June.
Discussing the Economic Pulse, Dr. Loretta O’Sullivan, Group Chief Economist, Bank of Ireland said: “The second half of the year got off to a good start, with the Economic Pulse reading in July the second highest of 2017. The business mood brightened this month with firms in the industry, services and construction sectors more upbeat. The Business Pulse is still off its pre-Brexit levels though.”
The Consumer Pulse came in at 96.6 this month, up 0.2 on last month and 6.9 on this time last year following the shock Brexit vote. While households’ view of the economy and their own financial prospects was little changed on the month, they were more upbeat about their current financial situation.
Dr. Loretta O’Sullivan commented; “Consumer confidence has been edging up over the past few months and is now at its highest level since the Brexit vote last June. Ongoing employment and income gains contributed to this, with the July survey indicating that 40% consider it is easy to find or change jobs, up from 30% a year ago, while two in five are also expecting a pay rise in the next 12 months.
“Households appear to be getting to grips with the two big curve balls of 2016; the UK’s decision to leave the EU and Trump taking the reins at the Oval office. What Brexit might mean for the economy was very much to the fore immediately after the referendum result. And this time last year, over two in five households indicated that were holding out on spending money because they weren’t sure what way economic policy was going to go. However with GDP and the labour market putting in a better than expected performance in the opening months of this year, the initial shock looks to be wearing off, with the number holding out on spending down to one in three in this month’s survey.”
At 93.4 in July 2017, the Business Pulse was up 2.7 on June’s reading and 1.8 on a year ago. The Industry Pulse rose for a fourth month running in July, with larger firms generally more positive. The Services and Construction Pulses also picked up in the month, whereas the Retail Pulse remained relatively subdued.
Dr. Loretta O’Sullivan commented; “On the wage front, one in three firms are planning on increasing basic pay in the next 12 months, while two in five workers are expecting a pay rise. While Brexit is a worry for many firms and the related uncertainty has taken a toll on sentiment, two in three businesses still have ambitions to expand over the next 1 to 3 years. Of these, one third is looking to actively pursue opportunities to grow, with the other two thirds adopting a more cautious approach to growth.”
The Housing Pulse gained ground in July 2017. The share of survey respondents expecting house prices to increase by more than 5% over the coming year ticked up in the month, taking the series to a new high of 118.3. The results also show that 57% think it is a good time to sell, with the Dublin figure higher at 65%.
Dr. Loretta O’ Sullivan commented; “Time of life, more space and the cost of renting top the list of reasons for wanting to buy a home, while rising house prices top the list of barriers to doing so. This was particularly evident in the capital where just two in five consider it a good time to purchase a property compared to one in two nationally.”
“Against this backdrop, some households are opting to renovate their existing property instead of moving. CSO data show that spending on improvements was up significantly in the first quarter of this year compared to the same period in 2016, while the latest Pulse results indicate that 27% are likely to spend a large sum of money on home improvements or renovations in the next 12 months.”
The Bank of Ireland Regional Pulses bring together the views of consumers and firms in different parts of the country. The 3 month moving averages show an improvement in sentiment in July 2017 in the Rest of Leinster and Connacht/Ulster, with little change in Munster but some softening in Dublin.
Consumers’ take on the economy differed across the regions this month, with Munster households particularly positive and Dublin households more muted. All were more upbeat about their current financial situation. On the business side, the number of firms expecting activity to increase in the next 3 months continues to outweigh those expecting a decrease, albeit the July reading for Connacht/Ulster was down notably.
Three month moving averages:
• Dublin Pulse = 95.0 - 2.0 points on the previous survey;
• Rest of Leinster = 91.2 + 0.7 points;
• Munster = 90.9 + 0.1 points;
• Connacht/Ulster = 92.9 + 0.9 points.
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.