Consumer confidence slips as doubts emerge on reopening plan

Bank of Ireland Economic Pulse reveals mixed picture, but business sentiment steady

The share of households expecting consumer prices to increase over the next year rose to a series high of 85 per cent. Photograph: Bryan O’Brien

The share of households expecting consumer prices to increase over the next year rose to a series high of 85 per cent. Photograph: Bryan O’Brien

 

Consumer confidence slipped this month on the back of rising costs and prices, along with emerging doubts over plans to fully lift the remaining public-health restrictions, according to the latest Bank of Ireland Economic Pulse.

The index, which combines the results of the consumer and business pulses, posted a reading of 87.6 in October. That was down 0.6 on last month but up 31.1 on a year ago.

Business sentiment held steady, though Bank of Ireland group chief economist Dr Loretta O’Sullivan said the overall data presented “a mixed picture”.

“Consumers were more hesitant this month, with various worries, not least increases in the cost of living and the rise in virus cases, taking the shine off households’ mood,” she said.

“The business mood remained sanguine on the whole but that’s not to say that everything in the garden is rosy.

“This month’s research finds that uncertainty is hampering activity in sectors like hospitality and arts and entertainment, for example, while firms in industry are grappling with supply bottlenecks and higher input costs, with adverse implications for export competitiveness.”

Cost of living

The consumer pulse came in at 77.1 in October, down four points on last month but 28.5 points higher than a year ago. Households lowered their assessment of the economic outlook and were also more downbeat about their own financial situation.

The cost of living was “very much on minds”, according to Bank of Ireland, with a further softening in buying sentiment evident in the October data as some 27 per cent considered it a good time to buy big-ticket items compared with almost a third during the summer.

The share of households expecting consumer prices to increase over the next year rose to a series high of 85 per cent.

The business pulse was 90.3, which was up 0.2 on last month and 31.7 higher than a year ago.

Construction pulse

The construction pulse led the way this month, with the industry and retail pulses also a little firmer. The services pulse slipped, however, with many firms indicating that uncertainty about economic policy – in general and specific to the sector – is holding them back.

The housing pulse stood at 118.8 in October, down 0.1 on last month’s reading but 54 points higher than a year ago.

With factors such as excess savings and the extension of the help-to-buy scheme adding to demand, four in five respondents expect house prices to increase over the coming 12 months.

On the supply side, the October survey found 74 per cent now think it is a good time to sell a property. This was up from just 25 per cent during the first lockdown and “points to a rebound in selling sentiment, which bodes well for an uptick in activity in the second-hand market”.

The economic pulse surveys 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.