Consumer and Business sentiment is growing in Ireland following the loosening of covid restrictions.
For May 2021, the Bank of Ireland Economic Pulse, a metric that combines the result of the Business and Consumer pulses, came in at 89.5. This is 4.1 points higher than last month, and 45.6 higher than a year ago. This is the fourth straight month that the Economic Pulse has increased, and it comes after a series of covid-19 related restrictions were loosened or lifted. In May, restrictions on social interactions were lifted, and several sectors emerged, at least partially, from lockdown. These sectors include the remainder of construction, personal services, and non-essential retail (by appointment only), with many other sectors getting ready to re-open.
This rising sentiment, combined with the expectation that lockdown measures will be loosened further in the coming months, has brought the Economic Pulse Index back above its pre-pandemic levels for the first time. This has led Bank of Ireland to revise its GDP forecast to 5.8%, up from its earlier estimate of 5%.
The Housing market is expected to come back to life as well, as the Housing Pulse index rose 4.3 in May to come in at 112.3. This is 87.0 higher than a year ago at this time. Surveys indicate that some three quarters expect house prices to increase over the next year, and some two thirds of respondents expect rent prices to increase over the next year.
This growing confidence in the economy and housing markets bodes well for spending over the next year, says Bank of Ireland Chief economist Loretta O’Sullivan. The consumer pulse index reflects this statement, as it came in at 76.7 for May 2021, up 5.0 on last month and 22.8 higher than last May. When surveyed, 32% of households think it is a good time to purchase “big ticket” items. Households are also more positive about their personal finances in general, especially with the vaccine roll out in Ireland advancing. In fact, a third of households indicate that they expect to spend more on the holidays this year than last year, a number that is up about a quarter from the pre pandemic average. O’Sullivan says that this points to pent up demand, which is set to be unleashed once more and more businesses are able to open, resulting in growth for the Irish economy.
However, it is not all good news, as the pulse surveys show that Brexit related trade complications are leading to higher input costs for some businesses, which could unfortunately spill over into consumer prices. According to the business pulse survey, 78% of construction firms, 67% of industrial firms, and 48% of retail firms have reported an increase in non-labor input costs over the last three months. Despite these inflationary pressures, the Irish economy is coming back to life, and is forecasted to grow at a rate higher than expected over the rest of the year.