Economic Pulse posts lowest reading of 2018

25th Nov 2018: The Bank of Ireland Economic Pulse came in at 89.9 in November 2018. The index, which combines the results of the Consumer and Business Pulses, was down 2.7 on last month and 0.6 lower than a year ago. Brexit developments have dominated the news flow in recent weeks, with the negotiations intensifying and speculation rife as the UK and EU sides worked towards a draft deal. While festive cheer helped to lift the mood, consumer and business sentiment was at a low ebb this month.

Commenting on Bank of Ireland’s November Economic Pulse research, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “There was no escaping Brexit this month and with the negotiations entering the endgame, the Economic Pulse headed south and posted its lowest reading of 2018 to date. While business sentiment was weighed down by Brexit, consumer sentiment was largely unchanged, with the festive mood helping to counter some of the Brexit gloom.”

Consumer Pulse

  • Consumer Pulse broadly unchanged in November
  • 35% think it is a good time to buy big ticket items
  • 72% likely to save over the next 12 months

After last month’s sharp drop, the Consumer Pulse was broadly unchanged in November 2018 at 90.1. Brexit uncertainty was a worry again this month and kept a lid on the mood, but with the festive season approaching and the countdown to promotional events like Black Friday underway, Christmas shopping was also on households’ minds. One in five indicated that they intend to spend more on presents this year compared to last year (with younger age groups leading the charge), while just over half are planning on spending about the same.

According to Dr Loretta O’ Sullivan, “The Consumer Pulse moved sideways this month amid a mix of Brexit worries and festive cheer. With Black Friday events galore over the weekend and Cyber Monday today, it’s all go for Christmas shopping. This month’s Pulse research finds that one in five households is planning on spending more on presents this year compared with last year, while three in ten retailers expect their turnover to be up. Retailers in the border area are less upbeat than elsewhere though, with just 12% expecting a better festive trading period versus 35% in Dublin and 39% in Munster. This owes much to the weak pound which will likely lead to a flurry of cross border shopping trips and is an issue for exporters to the UK as well as it impacts their competitiveness.”

Business Pulse

  • Business Pulse down in November
  • Brexit uncertainty at play
  • Retail Pulse bucks the trend

At 89.8 in November 2018, the Business Pulse was down 3.2 on last month. With the Brexit negotiations entering the endgame, the Industry and Services Pulses posted softer readings this month while the Construction Pulse was little changed. The Retail Pulse rose however, buoyed by broadly positive expectations for the festive trading period – three in ten retailers expect their turnover to be higher than last year, while 54% think it will be much the same. The weak pound is a headwind for the sector though as some consumers will likely travel to the North to do their shopping. Retailers in the border area are particularly exposed in this respect and, unsurprisingly, are less upbeat about Christmas trading prospects than firms in other parts of the country.

“While Prime Minister May and the EU did manage to reach a draft Brexit deal in November, it has met with opposition from the DUP, Tory Remain and Leave MPs and Labour. This highlights the difficulty there will be in getting it through the UK Parliament, meaning Irish consumer and business sentiment is likely to be buffeted by Brexit developments again in December and possibly into the New Year,” according to Dr Loretta O’ Sullivan.

Housing Pulse

  • Housing Pulse up in November
  • House price expectations in positive territory
  • Same for rents

The Housing Pulse recovered some ground in November 2018, coming in at 105.1. This was up 3.6 on last month’s reading but 12.3 lower than a year ago. Rising supply and the ongoing adjustment to the Central Bank’s mortgage rules have contributed to some softening in house price inflation and a cooling in expectations over the past while. However, with employment and incomes increasing and house completions still running below what is needed, seven in ten households expect prices to rise in the next 12 months, up from two thirds in October.

“There was some reprieve for the Housing Pulse this month, with the share of households expecting price gains over the next year ticking up,” said Dr Loretta O’ Sullivan.

Regional Pulse

The Bank of Ireland Regional Pulses bring together the views of households and firms in the different parts of the country. The 3 month moving averages show that sentiment was down in Dublin and Connacht/Ulster in November 2018, more or less flat in the Rest of Leinster and up a touch in Munster.

Three month moving averages:

  • Dublin Pulse = 95.6 -1.6 points on the previous reading;
  • Rest of Leinster = 92.5 -0.2 points on the previous reading;
  • Munster = 90.0 +0.4 points on the previous reading;
  • Connacht/Ulster = 85.5 -0.6 points on the previous reading.

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 approximately 2,000 businesses on a range of topics including the economy, their financial situation, spending plans, house price expectations and business activity.