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Consumer sentiment rallies in May, but business sentiment unchanged

A new monthly economic survey shows that while households remain cautious, the arrival of the holiday season looks to have raised their spirits a little.

But the mood among firms was little changed, with three in five still saying that they are finding it difficult to predict the future development of their business situation at present.

The latest Bank of Ireland Economic Pulse came in at 82.7 in May. The index, which combines the results of the Consumer and Business Pulses, was up 1.4 on last month but 6.8 lower than a year ago.

Bank of Ireland said the Consumer Pulse showed a reading of 55.5 in May, up 4.1 on last month but down 21.2 from a year ago.

Households were a little more assured about the economy and their own finances due to falling unemployment and the roll-out of Government measures to address the cost of living squeeze.

22% of consumers considered it a good time to purchase big ticket items like furniture and electrical goods, up from 19% in April.

Almost two in five said that they are planning on spending more on holidays this year compared with last year, well up on the pre-pandemic average of a quarter or so.

The Business Pulse came in at 89.5, slightly higher than last month but down 3.2 on a year ago.

The sectoral Pulses moved in different directions this month, with Services and Retail advancing but Industry and Construction weakening.

But the current inflationary environment is a headwind for firms in every sector with 87% of businesses reporting an increase in non-labour input costs over the past three months in May, the bank said.

However the amount of firms expecting to raise their selling prices in the near term eased to 64% from 67% in April.

Bank of Ireland said this may reflect the emergence of competitiveness concerns with a deterioration on this front evident in the industry survey data of late for firms selling domestically as well as those selling in foreign markets.

Meanwhile, the Housing Pulse stood at 115.5 this month, down 3.6 on last month’s reading but 3.3 higher than a year ago.

The share of survey respondents expecting house prices to increase by more than 5% over the coming year decreased down this month to 41% from 44% in April.

The fallout from the war in Ukraine is adding to inflation in the euro area and with the European Central Bank gearing up to raise interest rates in response, affordability is likely to be on the radar for existing and potential homeowners here in the months ahead, Bank of Ireland said.

Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland, said that after softening in March and April, the move up in the Economic Pulse this month was welcome.

“The picture in May was nuanced though, with the Consumer Pulse rallying but the Business Pulse largely unchanged. Households are now seeing the €200 electricity credit coming through and many are also benefitting from the reduction in public transport fares,” Dr O’Sullivan said.

“And as we head into the summer season, there appears to be plenty of pent up demand for holidays,” she said.

“Elevated costs remain a challenge for businesses however, with signs that these are starting to impact competitiveness evident in the recent survey data. From an economy-wide perspective, this is something that will need to be monitored,” she added.

Article Source – Consumer sentiment rallies in May, but business sentiment unchanged – RTE

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