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Irish firms scale back expectations for business activity and hiring

Written by Robert McHugh, on 25th Apr 2022. Posted in Economy

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Bank of Ireland has today released its latest Economic Pulse which is conducted by Ipsos MRBI on behalf of Bank of Ireland with 1,000 households and 1,350 businesses on a range of topics including the economy, their financial situation, spending plans, house price expectations and business activity. 
 
The index, which combines the results of the Consumer and Business Pulses, was down 3.1 on last month – its second consecutive drop - and was 4.2 lower than a year ago. The economic consequences of the war in Ukraine and the inflationary environment weighed on the mood this month, with households somewhat warier about spending and firms tempering their expansion plans a little. 

The Consumer Pulse took a further hit – albeit considerably less than last month – and is now not far off its COVID-19 low point. The Business Pulse also lost ground in April but is proving relatively resilient and remains above its pre-pandemic level.
 
Households lowered their assessment of the current economic situation this month and were also more downbeat about their own finances. High uncertainty and inflation contributed to some softening in buying sentiment in April too, with just 19% considering it a good time to make major purchases and more than half (57%) saying that they are holding out on spending because they are not sure which way economic policy is going to go (this is up from 46% in January).

While the Industry and Services Pulses were little changed this month, the Retail and Construction Pulses saw big drops. Firms in all four sectors pared back near-term expectations for business activity and hiring however. This month’s research also shows some slippage in growth ambitions, with 55% of firms indicating that they plan to expand in the next 1 to 3 years, down from almost three in five in January. Notably though the share intending to scale down hasn’t picked up - instead, more businesses are opting to stay the same size amid ongoing sourcing and staffing challenges and new uncertainties. 
 
Households raised their expectations for future house price gains this month, with expectations for rent increases also ticking up. Savings accumulated during the pandemic and new ways of working mean home improvements are on the agenda for some, with the April survey finding that 28% are likely to undertake renovations over the coming year. This is a little lower than recent readings though, possibly reflecting value for money concerns as well as capacity constraints in the construction sector. 
 
Commenting on the April Economic Pulse, Group Chief Economist for Bank of Ireland, Dr Loretta O’Sullivan said, "The fraught geopolitical situation is continuing to impact sentiment, with the Economic Pulse down for a second month running in April. The fallout from the war in Ukraine - increased uncertainty, higher global energy and non-energy commodity prices, and the spill-over effects of the sanctions on Russia to growth in our trading partners – will dampen economic activity in Ireland this year. The lifting of public health restrictions means that GDP is still set to expand, but by less than previously expected not least because this latest shock has shaken consumer and business confidence."

Source: www.businessworld.ie 

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