Bank of Ireland has released its latest economic pulse today 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.
With a further loosening of restrictions on social interactions, the resumption of inter-county travel, some sectors emerging from lockdown – the remainder of construction, personal services and non-essential retail (by appointment) returned during the May survey period – and others getting ready for lift-off, the consumer and business mood brightened this month. The increase in opportunities to spend lifted household buying sentiment, while firms saw their order books improve.
All four sectoral Pulses were firmer this month as the re-opening of the economy progresses. Less positively though, the May data point to growing inflationary pressures, with 78% of construction firms, 67% of firms in industry and 48% of retailers reporting an increase in non-labour input costs in the past three months. These are all series highs and owe much to post-Brexit red tape (with rising global commodity prices also a factor for some). Moreover, some impact for consumers looks to be on the cards - just over two thirds of builders and almost half of firms in industry and retail indicated that they expect to raise their selling prices in the near term.
Households upgraded their assessment of the economy and prospects for jobs this month as the easing of restrictions continued. They were also more positive about their current finances and with the vaccine roll-out advancing, a third indicated that they expect to spend more on holidays this year compared with last year. This is a good bit higher than the pre-pandemic average (of a quarter or so) and points to pent up demand, some of which is set to be unlocked in the coming weeks as accommodation services and hospitality re-open.
Commenting on the May Economic Pulse, Group Chief Economist for Bank of Ireland, Dr Loretta O’Sullivan said, "The May Pulse results show that momentum in the Irish economy is building. The headline Economic index is now back above its pre-pandemic level, which bodes well for a pick-up in spending as public health restrictions are lifted. A number of other factors will also help put the economy on a surer footing over the coming months, including some unwinding of the involuntary savings households built up during the crisis and the return to growth in the global economy. All of this has led us to revise up our Irish GDP growth forecast for 2021 to 5.8% (from 5.0% in February)."
She added, "But as this month’s Pulse surveys also show, post-Brexit trade frictions are adding to business costs and the potential spill-over to consumer prices from this and the unlocking of pent up demand will be something to watch out for as the year progresses."