Economic Pulse down again in July with drops in Consumer and Business Confidence

  • Economic Pulse falls in July
  • Consumer mood at a low ebb
  • Housing Pulse declines for third consecutive month

The Bank of Ireland Economic Pulse came in at 70.2 in July 2022. The index, which combines the results of the Consumer and Business Pulses, was down 8.5 on last month’s reading and 19.0 lower than a year ago.

A pullback in consumer and business confidence dragged the Economic Pulse lower in July. With households feeling the pinch from inflation while also fretting about the economy and firms more circumspect about business activity, the series fell for a second consecutive month to a seventeen month low.

As is usual at this time of the year, the latest research took a look at wage expectations. The findings show that 44% of workers are anticipating a pay rise in the next twelve months (to the tune of 3½% on average), while just over half of firms are planning on increasing basic pay for their employees (by a little over 4% on average).

Commenting on the July Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “A case of the summertime blues saw the Economic Pulse post a seventeen-month low in July. The pullback in sentiment this month was broad-based, with the Consumer Pulse falling below its COVID-19 nadir and the Industry, Services, Retail and Construction Pulses all losing ground. There were one or two bright notes in the July data though. The share of firms struggling with material, equipment and space shortages was down a bit, and non-labour input costs – while still elevated – look to be stabilising, both tentatively pointing to some easing in supply chain strains. On the labour front, pay increases are in prospect as businesses look to retain and attract staff and workers find it easier to get or change jobs. But with an eye to competitiveness and reflecting greater economic uncertainty, wage expectations remain relatively contained.”

Consumer Pulse

“The Consumer Pulse was at a low ebb in July, posting a reading below its COVID-19 nadir.”

  • Consumer Pulse down in July
  • Buying sentiment weakens
  • Three in five think it is easy to find or change jobs

Households’ gloomier assessment of the economy and their own finances saw the Consumer Pulse hit an all-time low of 43.4 in July 2022. Against the prevailing backdrop of high inflation and uncertainty, the index was down 7.9 on last month and 31.4 lower than a year ago. Buying sentiment took a knock this month too, with just one in six considering it a good time to make major purchases like furniture or electrical goods and a record 64% saying that they are holding out on spending because they are not sure which way economic policy is going to go.

Housing Pulse

“The Housing Pulse notched a hat-trick in July, falling for a third month in a row.”

  • Housing Pulse falls sharply in July
  • Softer readings in all regions
  • Borrowing costs on the rise

At 97.7 in July 2022, the Housing Pulse was 12.9 lower than in June and down 21.8 on a year ago. Households lowered their expectations for future house price gains this month, albeit more than three in five still think they will increase over the coming year (this compares with three in four last month). Interest rate hiking by the European Central Bank means higher mortgage repayments for some and may have contributed to the slippage in the share of respondents saying it is cheaper to buy than rent in the July survey (68% versus 76% in April).

Business Pulse

“The Industry, Services, Retail and Construction Pulses all lost ground this month.”

  • Business Pulse declines in July
  • Sixteen month low for the series
  • Pay increases on the cards

The Business Pulse stood at 76.9 in July 2022, down 8.7 on last month’s reading and 15.9 on a year ago. Firms in the four sectors were more downbeat about the ‘here and now’ this month and also pared back their expectations for business activity in the near term. For retailers, waning consumer confidence at home is a worry, with firms in industry and services concerned about the outlook for the world economy and their export order books as well. More positively, the share of businesses struggling with material, equipment and space shortages edged lower in July, to 27% from 31% in April. A third are continuing to experience labour shortages though, with the figure running a little higher for those in the construction trade (two in five).

  • Industry Pulse = 85.2 (-7.8 points on the previous survey)
  • Services Pulse = 79.0 (-6.0)
  • Retail Pulse = 61.4 (-21.3)
  • Construction Pulse = 78.2 (-5.7)

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 July 2022.

Three month moving averages:

  • Dublin Pulse = 85.9  (-2.7 points on the previous survey)
  • Rest of Leinster = 72.5 (-2.1)
  • Munster = 76.4 (-4.7)
  • Connacht/Ulster = 75.1 (-4.5)