• Households more upbeat about the economic environment
• Two in three firms have ambitions to expand over the next 1 to 3 years
• Majority expect house prices and rents to rise over the coming year
The Bank of Ireland Economic Pulse came in at 90.5 in October 2017. The index, which combines the results of the Consumer and Business Pulses, was up 1.7 on September but 4.0 lower than this time last year.
Budget 2018 took place during this month’s survey period, with some interviews conducted before the details were unveiled and some after, though the measures announced were broadly as expected. The Consumer Pulse rose in October, with business sentiment also up on the month. The picture was mixed across the sectors however, with the Retail and Construction Pulses ahead of last month’s readings but the Industry and Services Pulses behind.
Discussing the Economic Pulse, Dr. Loretta O’Sullivan, Group Chief Economist, Bank of Ireland said:
“The uptick in the Economic Pulse this month looks to be less of a Budget bounce than an unwinding of last month’s temporary setback on the consumer side, and greater positivity among retailers which may be partly related to the time of the year and firms hiring for the Christmas period. The mood among households brightened this month, with business sentiment also improving, albeit the picture was mixed across the sectors.”
The Consumer Pulse stood at 97.3 in October 2017, up 2.0 on September’s reading and 4.4 on a year ago. Households were more positive about the economy and the outlook for unemployment this month, which helped the index recover some of the ground lost last month. Their assessment of their own financial situation was little changed however, notwithstanding the changes to social welfare payments and income taxes outlined in Budget 2018. Buying sentiment was also little changed on the month, with more than one in three (37%) considering it a good time to purchase big ticket items such as furniture and electrical goods (36% in September).
Dr. Loretta O’Sullivan commented; “The Consumer Pulse was back on track this month, with sentiment among households picking up after last month’s temporary setback. Households were a focus of Budget 2018, with the USC and income tax changes and increases in social welfare payments supporting disposable incomes and spending power. But as the Budget day giveaways didn’t come as much of a surprise and were fairly modest, households’ assessment of their own financial situation was little changed this month, though there may be more of a reaction when the measures start to kick in.”
At 88.8 in October 2017, the Business Pulse was up 1.7 on last month but down 6.1 on a year ago. The Retail Pulse led the way this month, with the Construction Pulse also up a little. Industry and services sentiment was down however and the data also point to some softening in export orders for the coming three months. The weakness of the pound remains a key concern for firms exporting to the UK, as does Brexit-related uncertainty. On the wage front, two in five businesses indicated that they expect to increase basic pay over the next 12 months. This is up from one in three in July and reflects the ongoing improvement in the labour market, with firms also starting to factor in the forthcoming increase in the national minimum wage.
Dr. Loretta O’Sullivan commented; “This month’s research also considered the ability of firms to compete in EU markets including the UK and markets outside the EU. The weakness of the pound remains a key factor for firms exporting to the UK, with sterling hitting an eight year low of 93p against the euro in late August before recovering some ground. We have also seen the euro appreciate against the dollar. So it is not too surprising that the Pulse results show some softening in competitiveness for firms in industry over the past three months.”
The Housing Pulse rose for a second month running in October 2017, to 119.8. The majority of survey respondents continue to expect house prices to rise over the coming year, with the share expecting increases in excess of 5% ticking up this month. The data also suggest that it is something of a seller’s market at present; especially in Dublin where 71% consider it a good time to sell but just 40% think it is a good time to buy. The corresponding national figures are 63% and 49%. Rent expectations for the next 12 months were also in firm positive territory in October, while on the home improvements front, one in four is likely to spend a large sum of money doing up or renovating an existing property over the coming year.
The Bank of Ireland Regional Pulses combine the views of consumers and businesses in the different parts of the country. The October readings (three month moving average basis) indicate that sentiment was down on the month in the Rest of Leinster, Munster and Connacht/Ulster but up in Dublin.
The business picture was mixed across the regions this month, whereas households around the country were more positive about the economic outlook though their assessment of their own financial prospects was little changed for the most part. This was despite the changes to social welfare payments and income taxes outlined in Budget 2018. House price and rent expectations were in firm positive territory in each of the four regions in October and up on the month in all apart from Connacht/Ulster.
Three month moving averages:
• Dublin Pulse = 94.1 + 1.0 points on the previous survey;
• Rest of Leinster = 89.2 - 1.8 points;
• Munster = 91.6 - 0.6 points;
• Connacht/Ulster = 84.2 - 4.3 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.