Summer spirits lift for consumers and businesses

Housing, inflation and Brexit create the biggest clouds in otherwise upbeat outlook

People sit out in  the warm weather in Dublin’s Merrion Square  last week. It should  be a good summer for the economy (if not weather-wise), Bank of Ireland forecasts. Photograph: Aidan Crawley

People sit out in the warm weather in Dublin’s Merrion Square last week. It should be a good summer for the economy (if not weather-wise), Bank of Ireland forecasts. Photograph: Aidan Crawley

 

Irish consumers are poised to increase their spending on holidays this summer, while accommodation and food companies are more positive about the season ahead than they were a year ago, the latest economic snapshot from Bank of Ireland suggests.

The bank’s Economic Pulse study says business sentiment is now at a 23-month high, while consumer sentiment increased once again this month as households grew more upbeat about the economy and their financial situation.

Overall, the Bank of Ireland index, which combines both business and consumer sentiment, rose 2.7 points on April’s reading and was up 5.1 on May 2017.

“Summer is here and with spirits lifting, two in three households are planning on spending the same or more on holidays this year compared with last year,” said the bank’s group chief economist Loretta O’Sullivan.

“Firms in the accommodation and food sectors are also positive about prospects for the season and more so than they were this time last year. With the World Cup and a plethora of festivals and other events on the agenda, it is gearing up to be a busy period all round.”

While consumer confidence has been forging ahead this time last year, business sentiment had remained subdued, only rallying in 2018.

“Brexit uncertainty and geopolitical tensions aside, the Irish and global economies are doing well, which has helped things, and the gap between consumer and business sentiment now looks to be narrowing,” she said.

While business expectations have improved, inflation trends related to rising oil prices and exchange rate movements remain a concern.

Housing pressures, meanwhile, are weighing on consumers, with almost four in 10 (38 per cent) saying they are concerned about rising house prices, with a similar proportion (42 per cent) worried about the cost of renting.

“Most households in the capital and around the country are expecting further price increases in the coming year, which isn’t surprising given that the market remains in a state of disequilibrium, with supply well short of demand.”