Business sentiment rises for third consecutive month

  • Consumer sentiment is steady according to Bank of Ireland Economic Pulse

  • Majority of firms don’t expect to change their near-term selling prices

  • Three in four households are likely to put money aside over the coming year

  • Households in all regions increase expectations for future house price gains

The Bank of Ireland Economic Pulse came in at 83.0 in December 2019. The index, which combines the results of the Consumer and Business Pulses, was up 2.3 on November’s reading but 5.4 lower than a year ago. After a bounce last month, consumer sentiment moved sideways this month, while business confidence ticked up.

The Economic Pulse revealed that the majority of firms don’t expect to change their selling prices in the period ahead, even though two in five reported a rise in non-labour input costs. On the consumer front, three in four households said they are likely to put money aside over the coming year and there was greater confidence across all regions for future house price gains.

Commenting on Bank of Ireland’s December Economic Pulse research, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “While sentiment rose in December, the Economic Pulse ended the year below where it started it. 2019 has been a year of intense Brexit drama and political events across the Irish Sea were to the fore again this month, with the UK in the midst of a general election campaign as the December survey was being carried out. Business sentiment rose for the third month in a row, while consumer sentiment moved sideways, as households remain cautious.

“Prime Minister Johnson’s comfortable win means that the stage has now been set for the next phase of the Brexit process and as we move through 2020, the Economic Pulse will continue to track the impact on sentiment of this and other developments at home and abroad.”

The UK was in the midst of a general election campaign as the December survey was being carried out, capping off a year of Brexit-related drama. And even though the domestic economy has performed well, uncertainty has tempered the mood among households and firms, with the Economic Pulse ending 2019 below where it started it.

Business Pulse

”On the business confidence front, it was a bit of a mixed bag across the sectors this month”.

  • Business Pulse rises in December
  • Services and Construction Pulses gain ground, Industry and Retail give up some

The Business Pulse stood at 84.6 in December 2019, up 2.8 on last month but down 3.5 on a year ago. While the headline index rose for a third consecutive month, the picture was mixed across the sectors with the Services and Construction Pulses posting firmer readings, whereas the Industry Pulse eased back as did the Retail Pulse (the latter comes after a big jump in November). The December survey also finds that the bulk of firms do not expect to change their selling prices in the next 3 months, despite the fact that almost two in five reported a rise in non-labour input costs over the past 3 months. Along with other factors, Brexit developments will continue to be important for business investment, which has been impacted by uncertainty.

Consumer Pulse

”Households were in ‘wait and see’ mode this month, sitting tight as the UK electorate headed to the polls.”

  • Consumer Pulse moves sideways in December
  • Households remain cautious, especially about the economy

At 76.4 in December 2019, the Consumer Pulse was more or less flat on the month but down 12.9 on a year ago. Households’ assessment of the general economic situation and their personal finances was little changed this month as they waited to see where the Brexit process goes next. The buying and savings climate also held steady, with three in ten considering it a good time to purchase big ticket items such as furniture and electrical goods, while 74% indicated that they are likely to put some money aside over the coming year.

Housing Pulse

”The Housing Pulse ticked up in December though it is still a long way off past highs.”

  • Housing Pulse up in December
  • Over two in five worried about rising house prices, 46% worried about rental costs

The Housing Pulse rose for a second month running in December 2019 to 84.6. This was 3.7 higher than the previous reading but 16.2 lower than the same time last year. The improvement in sentiment this month was broad based across the regions – households in Dublin, the Rest of Leinster, Munster and Connacht/Ulster all upped their expectations for future house price gains. The data also show that around one in seven thinks prices will increase by more than 5% in the coming year, with the figure for the capital a touch higher at one in five.

Regional Pulse

The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The results for December 2019 (3 month moving average basis) show that sentiment was up on the month in all four regions.

  • Dublin Pulse = 85.5 +1.7 points on the previous survey;
  • Rest of Leinster = 78.1 +3.3;
  • Munster = 75.9 +2.5;
  • Connacht/Ulster = 79.5 +0.4 points.