Bank of Ireland has today released its latest Economic Pulse is are 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 stood at 83.2 in November 2021, its lowest reading in eight months. The index, which combines the results of the Consumer and Business Pulses, was down 4.4 on last month but up 16.2 on a year ago.
Setbacks on the COVID and Brexit fronts were to the fore this month, with households and firms anticipating some tweaks to the public health guidance and unsettled by UK threats to trigger Article 16 of the Northern Ireland Protocol and warnings from the EU that such a step could have serious consequences, including for the broader trade agreement. Against this backdrop, consumer and business confidence took a turn for the worse.
The Business Pulse came in at 85.2 in November 2021, down 5.1 on last month but 16.6 higher than a year ago. All sectoral Pulses lost ground this month as uncertainty – both COVID and Brexit related – dulled the mood. Services firms were decidedly gloomier about near-term prospects for business activity; and while four in five retailers expect their Christmas turnover to be the same or higher than last year, this is a little lower than normal as the sector contends with stock shortages. Supply chain disruption is causing problems for builders and firms in industry too, with knock-on impacts for input costs and selling prices.
This month’s research also took a look at businesses’ investment plans. The data show that 38% expect to increase spending in 2022 compared with this year, spurred on by strong demand from customers and supportive financial conditions and other factors. An expansion of production capacity is in the offing, along with the replacement of worn-out plant and equipment and investment to streamline processes.
The Consumer Pulse softened for a second month running in November 2021. At 75.2, the index was 1.9 lower than in October but 14.9 higher than a year ago. With virus cases increasing and UK-EU tensions elevated, households were more downbeat about the economy’s prospects this month. Their assessment of their own financial situation was little changed though. As for Christmas shopping, 75% said they intend to spend the same or more on presents compared with last year. This is up from three in five in 2020 and back in line with the pre-pandemic figure.
The Housing Pulse came in at 116.5 in November 2021, down 2.3 on last month’s reading but 44.8 higher than a year ago. While four in five households still think house prices will rise over the coming year, the share expecting them to go up by more than 5% eased to 40% in November, from 43% in October. This contributed to the slippage in the index this month and hints at affordability concerns. The rents picture was similar, with expectations for rent increases in excess of 5% also ticking down, perhaps in anticipation of the new cap that is being legislated for.
Commenting on the November Economic Pulse, Group Chief Economist for Bank of Ireland, Dr Loretta O’Sullivan said, "There was a step down in the Economic Pulse this month, with both the consumer and the business mood souring. Some sprinkles of festive cheer were evident in the survey results but not enough to offset COVID concerns and Brexit blues. Households downgraded their expectations for the economy over the coming year and with all four of the business sectors posting softer readings in November, economic sentiment fell to an eight month low."
She added, "Not only is uncertainty increasing again but pandemic and Brexit-related bottlenecks are biting. These are having spill-over effects, with three in four firms reporting increases in non-labour input costs and over half saying that they are likely to hike their selling prices. More positively though, the November Pulse research finds that investment to expand production capacity is on the cards for next year. This suggests that adjustment is starting to happen on the supply side, which should help alleviate some of the pressure on business costs and consumer prices."