BOI outlines ‘grim’ state of the economy in sentiment survey

Bank’s Economic Pulse index finds massive fall in business activity, fears over job losses

The M50 in Dublin on March 29th.Photograph: Tom Honan

The M50 in Dublin on March 29th.Photograph: Tom Honan

 

The full impact of the Covid-19 lockdown on business and consumer confidence is laid bare in a measure of economic sentiment that Bank of Ireland says has turned “grim in the extreme”.

The bank’s Economic Pulse index, which separately measures economic confidence in households and companies, hit an all-time low this month, on top of a record fall last month.

“This month’s survey findings are grim in the extreme,” said Loretta O’Sullivan, the bank’s chief economist. “The Economic Pulse reading is down a whopping 36 points, more than double last month’s drop.”

On the business side, the survey finds that 70 per cent of businesses reported a drop in activity in April and about 60 per cent expect a further drop over the next three months. Roughly one-in-four anticipate having to let staff go, while about one-in-five expect to cut wages.

The dire sentiment measures is apparent across the board in retail, services, industry and construction. One-in-three companies, however, say they are seeing increased opportunities as consumers and businesses adapt to the lockdown.

“Expectations for house price increases took a battering this month, with buying and especially selling sentiment also softening,” said the bank. Just one-in-four think now is a good time to sell a house, compared to 61 per cent at the beginning of the year.

On the consumer side, about 60 per cent of households said they are already holding back on spending to see which way economic policy goes in the near future: “Just 13 per cent considered it a good time to purchase big-ticket items like furniture and electrical goods, down from 31 per cent last month.”

About 30 per cent of households are worried about the potential loss of jobs. One-in-three are worried about a reduction in working hours while 45 per cent have concerns that their pay will be cut. About 27 per cent were worried about meeting their mortgage or rent payments.

“The Covid-19 shock is unprecedented and has resulted in a sudden turnaround in the economy’s fortunes. Given this and the huge uncertainty about the path of the virus and the depth and duration of the recession, it is no wonder that households and firms are very uneasy,” said Ms O’Sullivan.

The Pulse survey, carried out by Ipsos MRBI, surveys 1,000 consumers and 2,000 businesses monthly. It is run by Bank of Ireland in conjunction with the European Commission.

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