Consumer sentiment plummets, while business sentiment drops slightly· Economic Pulse falls in March· Consumer confidence tumbles - households react to Russian-Ukraine conflict· Over a third of firms expect to increase investment this year
The Bank of Ireland Economic Pulse came in at 84.4 in March 2022. The index, which combines the results of the Consumer and Business Pulses, was down 3.8 on last month but 10.7 higher than a year ago.
Consumer confidence took a big knock this month as households reacted to the escalation of the Russian-Ukraine conflict and the potential fallout for the economy and inflation. Firms were affected by this latest uncertainty too, with three in five saying that they are finding it difficult to predict the future development of their business situation at present (up from 53% in February).
Commenting on the March Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “Economic sentiment was down this month amid the horror of war in Europe. Russia’s invasion of Ukraine has led to a humanitarian disaster and has clouded the economic outlook just as the fog of COVID-19 was lifting. Against this backdrop, the Consumer Pulse posted its second biggest monthly drop ever (the fall was around half the size of the pandemic-induced hit to confidence), with the Business Pulse also slipping in March. The uncertain geopolitical situation is a headwind for GDP growth and living costs in Ireland. Much will depend on the duration of the conflict and on the actions of policymakers, factors which will also shape sentiment among households and firms in the period ahead.”
“Concerns for the economy in particular took the Consumer Pulse to a 17-month low in March.”
· Consumer Pulse down sharply in March
· Second biggest monthly drop
· Broad-based weakness
The Consumer Pulse stood at 56.7 in March 2022. This was 14.5 lower than last month’s reading and 13.1 lower than a year ago. Heightened uncertainty saw households take a more downbeat view of economic and employment prospects for the coming year this month, while soaring energy prices in the wake of Russia’s invasion of Ukraine added to cost of living woes. Nine out of ten households now think that consumer prices will rise in the next twelve months - up from 82% in February – which contributed to the gloomier assessment of their own finances in the March survey.
“The Business Pulse dipped in March as the lifting COVID fog was overshadowed by geopolitical headwinds.”
· Business Pulse softer in March
· Firms pare back expectations for near-term activity
· Investment still on the cards
The Business Pulse came in at 91.3 in March 2022, down 1.1 on last month but 16.7 higher than a year ago. The picture was mixed this month though, with the Services Pulse rising as the post-restrictions rebound continued, whereas the Retail Pulse slipped a little and the Industry and Construction Pulses fell quite a bit against the backdrop of the Russian-Ukraine war. The latter is likely to temper demand and exacerbate existing supply-side issues and cost pressures - firms in all sectors were more circumspect about the three-month outlook for business activity in March, while 83% reported that their non-labour input costs had increased in recent months (up from 79% in February). Even so, over a third (35%) indicated that they expect to spend more on investment this year compared with last year.
· Industry Pulse = 89.5 -6.7 points on the previous survey;
· Services Pulse = 92.4 +2.5;
· Retail Pulse = 87.6 -2.3;
· Construction Pulse = 93.3 -13.6.
“Having reached a new peak last month, the Housing Pulse came unstuck this month."
· Housing Pulse drops in March
· House price and rent expectations slip
· But stay in positive territory
The Housing Pulse lost ground in March 2022, coming in at 116.1. This was down 6.8 on February but 18.7 higher than a year ago. Reflecting the unsettled mood this month, households in all regions pared back their expectations for future house price gains. Expectations for rent increases also dipped across the board. That said, four in five still think house prices will go up over the next year and three in four think rents will rise as the demand for accommodation remains in excess of the number of properties available to buy and let.
The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The results for March 2022 (3 month moving average basis) show that sentiment was up in Dublin and Munster, broadly unchanged in the Rest of Leinster and down in Connacht/Ulster.
Three month moving averages:
· Dublin Pulse = 91.0 +4.1 points on the previous survey;
· Rest of Leinster = 81.7 -0.4;
· Munster = 84.6 +2.7;
· Connacht/Ulster = 86.4 -1.5.
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 1,350 businesses on a range of topics including the economy, their financial situation, spending plans, house price expectations and business activity.