Consumer sentiment rallies this month, business sentiment broadly unchanged
- Bank of Ireland Economic Pulse up slightly in May
- Pent up demand for holidays among households
- Business Pulse remains above its pre-pandemic level
The Bank of Ireland Economic Pulse came in at 82.7 in May 2022. The index, which combines the results of the Consumer and Business Pulses, was up 1.4 on last month but 6.8 lower than a year ago.
It was a nuanced picture this month, with the Consumer Pulse regaining some lost ground whereas the Business Pulse more or less stalled. While households remain cautious in the main, the arrival of the holiday season looks to have raised spirits a bit. The mood among firms was little changed though, with three in five still saying that they are finding it difficult to predict the future development of their business situation at present.
Commenting on the May Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “Having softened in March and April, the move up in the Economic Pulse this month is welcome. The picture in May was nuanced though, with the Consumer Pulse rallying but the Business Pulse largely unchanged. Households are now seeing the €200 electricity credit coming through and many are also benefitting from the reduction in public transport fares. And as we head into the summer season, there appears to be plenty of pent up demand for holidays. Elevated costs remain a challenge for businesses however, with signs that these are starting to impact competitiveness evident in the recent survey data. From an economy-wide perspective, this is something that will need to be monitored.”
Consumer Pulse
“After a hat-trick of declines, the Consumer Pulse staged a rally this month.”
- Consumer Pulse rises in May
- Buying sentiment a touch firmer
- Pent up demand for holidays
At 55.5 in May 2022, the Consumer Pulse was 4.1 higher than last month but down 21.2 on a year ago. Helped by falling unemployment and the roll-out of Government measures to address the cost of living squeeze, households were a little more assured about the economy and their own finances this month. Some 22% considered it a good time to purchase big ticket items like furniture and electrical goods (versus 19% in April), while almost two in five said that they are planning on spending more on holidays this year compared with last year (well up on the pre-pandemic average of a quarter or so).
Business Pulse
“The Business Pulse more or less stalled in May but remains above its pre-pandemic level.”
- Business Pulse broadly unchanged in May
- Firms lower expectations for business activity
- Upward cost pressures at a series high
The Business Pulse came in at 89.5 in May 2022, 0.8 higher than last month but down 3.2 on a year ago. While the sectoral Pulses moved in different directions this month – Services and Retail advanced but Industry and Construction softened – the current inflationary environment is a headwind for firms across the board. 87% of businesses reported an increase in non-labour input costs over the past three months in May, though the share expecting to raise their selling prices in the near term eased to 64% (from 67% in April). This may reflect the emergence of competitiveness concerns – a deterioration on this front is evident in the industry survey data of late for firms selling domestically as well as those selling on foreign markets.
- Industry Pulse = 87.3 -2.8 points on the previous survey;
- Services Pulse = 93.5 +1.0;
- Retail Pulse = 79.9 +4.7;
- Construction Pulse = 83.2 -3.3.
Housing Pulse
“While the Housing Pulse slipped in May, expectations are still in positive territory.”
- Housing Pulse down in May
- 79% of households think house prices will rise in the next year
- Affordability on the radar
The Housing Pulse stood at 115.5 in May 2022, down 3.6 on last month’s reading but 3.3 higher than a year ago. The share of survey respondents expecting house prices to increase by more than 5% over the coming year ticked down this month (to 41% from 44% in April), which accounted for the slippage in the index. The fallout from the war in Ukraine is adding to inflation in the Euro area and with the European Central Bank gearing up to raise interest rates in response, affordability is likely to be on the radar for existing and potential homeowners here in the period ahead.
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 up in Dublin but down in the Rest of Leinster, Munster and Connacht/Ulster in the March to May period compared with the February to April period.
Three month moving averages:
- Dublin Pulse = 93.4 +1.0 points on the previous survey;
- Rest of Leinster = 74.8 -3.6;
- Munster = 83.9 -2.7;
- Connacht/Ulster = 78.3 -3.0.