Fall in Business Sentiment Drags Irish Economic Pulse to a Two-Year Low
The Bank of Ireland Economic Pulse came in at 60.5 in October 2022. The index, which combines the results of the Consumer and Business Pulses, was down 10.1 on September and 27.1 lower than a year ago.
The October survey findings were mixed, with consumer confidence rising but business sentiment falling. While households appear to have taken some solace from the measures announced in Budget 2023, recent weeks have also seen an escalation of the war in Ukraine and economic and political instability in the UK, adding to existing business woes and rattling firms.
Commenting on the October Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland, said: “Households sounded a brighter note in October, but firms were singing the blues. The Business Pulse posted a 21-month low as firms contended with softening demand, fresh uncertainty and currency volatility. The large fall in business sentiment also dragged the headline Economic Pulse down in October, to a two-year low. In contrast, the Consumer Pulse benefited from a Budget bounce. But given the cost-of-living squeeze, the €11 billion tax and spending package was not so much a ‘giveaway’ as a case of running to stand still, meaning the improvement in household sentiment was marginal enough, though welcome.”
Business Pulse
“The Business Pulse posted a 21-month low after taking a knock in October.”
- Large fall in Business Pulse in October
- Services sector leads the downward charge
- Future growth ambitions hold steady.
At 64.2 in October 2022, the Business Pulse was down 13.6 on September’s reading and 26.1 lower than a year ago. The Construction Pulse was broadly unchanged on the month whereas the Services, Retail and Industry Pulses lost ground. Softening demand and uncertainty were cited by firms in the services and retail sectors as key factors currently limiting their activity; while firms in industry were especially circumspect about their export order books, not least because of the market turmoil and sharp sell-off in the pound triggered by the ‘fiscal event’ in the UK. More positively, the October survey finds that growth ambitions were steady, with half of firms still planning to expand their business in the next 1 to 3 years.
- Industry Pulse = 77.7 -8.3 points on the previous survey.
- Services Pulse = 57.9 -19.5
- Retail Pulse = 69.9 -3.9
- Construction Pulse = 75.1 +0.5.
Consumer Pulse
“Although off its low point, the Consumer Pulse remained subdued in October.”
- Consumer Pulse rises in October
- Budget package a help to households
- Appetite for purchasing big ticket items still muted.
The Consumer Pulse stood at 45.8 in October 2022, up 3.7 on last month’s reading but 31.3 lower than a year ago. Amid the unveiling of additional cost of living supports – including a €600 electricity credit for all and double social welfare payments – households were less gloomy about the outlook for the economy and their own finances, albeit the bounce in sentiment was relatively modest. On the buying front, just 14% considered it a good time to purchase big ticket items like furniture and electrical equipment, while some three in five are continuing to hold out on spending.
Housing Pulse
“The Housing Pulse moved down for a second consecutive month in October.”
- Housing Pulse slips in October
- Some households facing higher mortgage repayments
- 68% think it is cheaper to buy than rent.
The Housing Pulse came in at 87.3 in October 2022, down 12.6 on last month and 31.5 lower than a year ago. The European Central Bank raised interest rates by 0.75 percentage points in September and with October’s meeting seen delivering a similar sized hike, households pared back their expectations for future house price gains once again. Over half of survey respondents now think prices will increase over the coming year, which is down from around four in five in early 2022. Moreover, almost a fifth are anticipating price falls, up from 4% back in January.
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 across the board in the August to October period compared with the July to September period.
Three month moving averages:
- Dublin Pulse = 77.8 -3.2 points on the previous survey.
- Rest of Leinster = 65.9 -0.4
- Munster = 62.8 -5.6
- Connacht/Ulster = 65.4 -2.1.
