Bank of Ireland today released its latest Economic Pulse survey 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 Pulse came in at 84.5 in January 2022. The index, which combines the results of the Consumer and Business Pulses, was up 4.6 on last month and 22.9 higher than a year ago.
With the acceleration of the vaccine booster campaign and signs that the Omicron wave of the virus may be less severe and relatively short-lived, Bank of Ireland say the mood this month was one of cautious hope. Households sounded a brighter note about the economy, while firms were more optimistic about near-term prospects for business activity.
Against a backdrop of high consumer price inflation and a tightening labour market, the January research also took a look at wage expectations for 2022. The findings show that 46% of workers are anticipating a pay rise in the next 12 months (of just over 3% on average), while half of firms – a series high – are planning on increasing basic pay for their employees (by 4% on average).
Amid restrictions and virus-related staff absences, firms in all sectors apart from retail were more downbeat about the recent trading period. But with the public health situation expected to improve in the weeks ahead, prospects for near-term business activity were revised up across the board (services firms led the way). Downing Street’s decision to temporarily postpone the introduction of customs controls on goods moving between Ireland and Great Britain also saw firms in industry upgrade their outlook for exports. Labour shortages remain a concern for businesses however, especially those in the construction sector.
Receding Omicron fears helped lift households’ spirits this month, with good news on the FDI and tax fronts – 2021 was a record breaking year for employment in the multinational sector according to the IDA, while the State recorded its highest ever tax take – also providing reassurance about the economy’s resilience. Households were more upbeat about their own finances in January as well, though buying sentiment was unchanged on the month (one in four considered it a good time to make major purchases like furniture and electrical equipment).
The share of survey respondents expecting house prices to increase by more than 5% over the coming year ticked down this month (to 38% from 43% in December), contributing to the slippage in the index and hinting at affordability concerns. That said, seven in ten still consider it cheaper to buy than rent in their area when the typical monthly mortgage repayment and the typical monthly rent for similar properties are compared.
Commenting on the January Economic Pulse, Group Chief Economist for Bank of Ireland, Dr Loretta O’Sullivan said, "The Economic Pulse was on the front foot this month as Omicron fears receded, with both the Consumer Pulse and the Business Pulse re-gaining some of the ground they lost late last year. Households and firms were cautiously hopeful that the peak of the virus wave was nigh and that restrictions would be gradually eased through February. So the Government’s announcement on January 21st that virtually all public health measures were to be removed more or less immediately came as something of a surprise. It also came after the fieldwork for this month’s survey was carried out which suggests that economic sentiment may bounce further next month when the reaction to ‘Freedom Day’ is captured."
She added, "For the economy, the lifting of COVID uncertainty is a welcome development, as are the hints in the January Pulse data that supply bottlenecks may be starting to ease. For example, 28% of firms indicated that they were struggling with material, equipment and space shortages this month, which is down from 34% in last October’s survey. A third of firms are continuing to experience labour shortages though and as businesses look to retain and attract staff in the months ahead, and workers find it easier to get or change jobs, some upward pressure on pay is likely."
Source: www.businessworld.ie
