• Bank of Ireland Economic Pulse hits historic low as Business and Consumer sentiment plummet in April

    Business and Consumer sentiment plummet in April

     

    Bank of Ireland Economic Pulse hits historic low

     

    • Firms downbeat about business activity
    • Three in five households are holding out on spending
    • Just one in four think it is a good time to sell a property

     

    The Bank of Ireland Economic Pulse came in at 34.3 in April, the lowest reading in its history. The index, which combines the results of the Consumer and Business Pulses, was down 36.1 on last month and 57.0 lower than a year ago.

     

    While necessary from a public health perspective, the school and non-essential business closures and other containment measures the government has taken to limit the spread of the coronavirus have led to large swathes of the economy shutting down, and with households and firms bearing the brunt and uncertain about the future, consumer and business confidence plummeted this month.

     

    Three in five firms said they expect a further decline in business activity in the coming three months and just over a quarter anticipate having to lay off staff. Three in five households indicated that they are holding out on spending because they are not certain which way economic policy is going to go.

     

    Commenting on Bank of Ireland’s April Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “This month’s survey findings are grim in the extreme. The Economic Pulse reading is down a whopping 36 points, more than double last month’s drop. With the country more or less in full lockdown, job losses soaring and incomes under pressure, consumer and business confidence both tanked in April. 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.”

     

    Consumer Pulse

    “With the economy and the labour market going into reverse, consumer confidence tumbled in April.”

     

          Consumer Pulse falls sharply in April

          Broad-based weakness

          Buying sentiment hard hit

     

    The Consumer Pulse stood at 53.2 in April 2020, down 25.3 on last month and 30.3 on a year ago. Households’ assessment of the economy and their own financial prospects moved deep into the red this month, taking the headline index to an all-time low. With the COVID-19 pandemic very much to the fore, just 13% considered it a good time to purchase big ticket items like furniture and electrical goods (down from 31% last month).

     

    Households’ concerns about the COVID-19 pandemic:

    Losing own job

    30%

    Reduction in own working hours

    33%

    Cut to own pay

    45%

    General economic slowdown

    88%

    Rising unemployment

    90%

    Paying mortgage or rent

    27%

    None of these

    4%

     

    Business Pulse

    “With the COVID-19 pandemic upending day-to-day commerce, the four sectoral Pulses nosedived in April.”

     

          Huge drop in Business Pulse in April

          Firms downbeat about business activity and hiring

          One in five expects to cut wages in the coming year 

     

    The Business Pulse posted a historic low in April 2020, coming in at 29.6. This was down 38.8 on March and 63.7 lower than a year ago. This month’s readings were weak across the board, with seven in ten firms reporting lower business activity in the recent trading period(led by services and retail). The COVID-19 outbreak and the policy actions being taken at home and overseas to suppress the virus are affecting businesses through a number of channels – demand, supply chains, operations etc. – and mostly negatively, though around three in ten are seeing some new opportunities.

     

    Main channels through which the COVID-19 pandemic is affecting businesses:

     

     

    Industry

    Services

    Retail

    Construction

    Reduced demand from domestic customers

    80%

    83%

    76%

    83%

    Reduced demand from overseas customers

    34%

    33%

    25%

    7%

    Supply chain disruptions

    62%

    36%

    64%

    73%

    Operational difficulties

    75%

    76%

    76%

    84%

    General economic slowdown

    79%

    80%

    82%

    90%

    Seeing new opportunities

    31%

    31%

    31%

    22%

    No impact

    2%

    2%

    1%

    2%

     

    Housing Pulse

    “Expectations for house price increases took a battering this month, with buying and especially selling sentiment also softening.”

     

          Housing Pulse nosedives in April

          25% think it is a good time to sell (down from 61% at the start of the year)

          Three in ten think it is a good time to buy (previously 38%)

     

    The Housing Pulse came in at 25.0 in April 2020. This was down 52.4 on last month and marks a fresh low for the series. Expectations for house price gains over the coming year fell sharply this month, and for the first time since sentiment started to be tracked in January 2016, more households now expect prices to decline (55%) than go up (one in seven). The COVID-19 outbreak has imparted a significant shock to the economy and with the government imposing a temporary rent freeze and ban on evictions, households’ expectations for future rent increases also headed into negative territory.

     

    Regional Pulse

    The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The results for April 2020 (3 month moving average basis) show that sentiment was down on the month in all four regions.

     

    Three month moving averages

    •             Dublin Pulse = 59.3                     -20.7 points on the previous survey;

    •             Rest of Leinster = 65.5                -15.8;

    •             Munster = 65.9                            -14.5;

    •             Connacht/Ulster = 64.9               -18.3.

     

    About the Bank of Ireland Economic Pulse:

    The Bank of Ireland Economic Pulse survey is conducted in conjunction with the European Commission, with the data feeding into the EU Commission’s Joint Harmonised EU Programme of Business and Consumer Surveys, a Europe-wide sentiment study running since the 1960s. The Economic Pulse surveys are conducted by Ipsos MRBI on behalf of Bank of Ireland with 1,000 households and approximately 2,000 businesses on a range of topics including the economy, their financial situation, spending plans, house price expectations and business activity. 

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