Consumer confidence rises but business sentiment slips in Economic Pulse

  • Bank of Ireland Economic Pulse marginally softer in August
  • More than half of households think the economy will get better in the next year
  • Firms reporting an increase in non-labour input costs over the past three months

The Bank of Ireland Economic Pulse came in at 88.8 in August 2021. The index, which combines the results of the Consumer and Business Pulses, was 0.4 lower than last month but up 29.5 on a year ago.

While the headline reading was little changed on the month, the underlying picture was mixed. The Consumer Pulse was in catch up mode and moved higher as households upgraded their assessment of both the general economic and their own financial situations. The Business Pulse slipped though, not least because the rebound in sentiment across the four sectors – industry, services, retail and construction – is already complete.

Commenting on the August Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “It was a mixed picture this month, with consumer confidence rising but business sentiment slipping. This reflects some catch up on the part of households and some pausing for breath on the part of firms. It is also the case that the big gains associated with the re-opening of the economy are largely behind us. There has been a substantial easing of public health restrictions in recent months and we are now starting to see the Economic Pulse, and similar indicators in other countries, plateau at relatively high levels. That said, there is a little further to go on the re-opening front here, so coming surveys will tell what impact the Government’s plans in this regard have on sentiment.”

Consumer Pulse

“A jump in August took the Consumer Pulse closer to its pre-pandemic reading.”

  • Consumer Pulse up in August
  • Gain reflects some catch up on the part of households

After moving sideways in June and dipping slightly in July, the Consumer Pulse re-gained traction in August 2021, coming in at 81.0. This was 6.2 higher than last month and up 28.1 on a year ago. The improvement was broad-based across the components, with households more optimistic about the economy, their personal finances and job prospects this month. A slew of positive developments – the strong vaccine uptake, the resumption of indoor hospitality and the fall in the numbers receiving the Pandemic Unemployment Payment – helped lift consumer confidence, which is now not far off its pre-COVID level. Over half (55%) of households think the economy will get better in the next 12 months, while one in three sees their finances improving.

Business Pulse

“Bottlenecks are becoming apparent and impacting a range of business sectors.”

  • Business Pulse down in August
  • Costs a concern for firms and putting upward pressure on selling prices

At 90.8 in August 2021, the Business Pulse was down 2.1 on July’s reading but 29.9 higher than a year ago. While the Retail Pulse rose this month, the Construction Pulse moved sideways and the Industry and Services Pulses softened. Not only are the big gains from the re-opening of the economy mostly behind us, but businesses are grappling with pandemic and post-Brexit related bottlenecks. These are having spill-over effects, with 88% of builders, 78% of firms in industry, 58% of retailers and 53% of services firms reporting an increase in non-labour input costs over the past three months (all of which are near or series highs), and many saying that they are likely to hike selling prices in response.

Housing Pulse

“The Housing Pulse dipped in August, bringing to an end a fifteen month run of gains.”

  • Housing Pulse eases in August
  • Majority still expecting house prices to rise over the next year, same for rents

The Housing Pulse was down 1.5 on the month in August 2021, its first drop since the throes of the pandemic. At 118.0, the series remained at a high level though and well up (+59.8) on a year ago. With demand continuing to outstrip supply, four in five households expect house prices to rise in the next 12 months, while only 5% are anticipating a fall. Expectations for rents also ticked down a notch this month but remain elevated – some seven in ten think increases are in the offing over the coming year whereas just 3% think they will ease.

Regional Pulse

The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The results for August 2021 (3 month moving average basis) show that sentiment was up in Dublin and the Rest of Leinster but down in Munster and Connacht/Ulster.

Three month moving averages:

  • Dublin Pulse = 87.8 +0.4 points on the previous survey;
  • Rest of Leinster = 96.0 +3.2;
  • Munster = 86.7 -1.5;
  • Connacht/Ulster = 87.8 -2.1.