Consumer and business sentiment picked up in December, but Brexit, the US presidential election and domestic unrest all took their toll during the year.
The Bank of Ireland Economic Pulse, which measures consumer and business sentiment, rose to 92.4 in December, up 6.6 points on November's reading. The rise was fuelled mainly by increased business sentiment, which rose 7.9 points to 93.1 during the month. The consumer reading was up 1.2 points on the month to 89.5.
However, Bank of Ireland’s group chief economist Dr Loretta O’Sullivan said 2016 was an eventful year and overall the economic pulse reading was lower at the end of December compared with a year earlier.
“While sentiment picked up in December, developments over the course of 2016 have taken their toll,” she said.
“The general election and industrial unrest at home. The UK voting to leave the EU. Sterling falling and the outcome of the US presidential election all made it an uncertain year. These developments weighed on confidence with both the Consumer and Business Pulses in December down on their January readings, albeit up on November.”
Business activity
The business pulse showed an improvement in all four sectors for the month, with companies in the industry, services and construction sector more upbeat about business activity in the short term than the retail sector. They were also upbeat about hiring in the near term. The survey covered 2,000 businesses during the month.
“The December findings indicate that most firms do not expect to change their selling prices in the period ahead, and also point to some pressure on the input costs front, excluding labour costs, over the past three months,” Dr O’Sullivan. She noted the gain in sterling against the euro and the strengthening of the US dollar in recent weeks as a potential factor in this.
The Consumer Pulse, which takes in 1,000 households, showed an increasing optimism about the economic outlook and personal finances during the month, as the festive season helped lift some of the gloom that had hit consumers in November. However, buying sentiment was unchanged, with 35 per cent considering it a good time to purchase large items, including furniture and electrical goods.
Likely to save
The survey found that two-thirds of consumers were likely to save over the coming 12 months, particularly younger people living in Dublin and those who were living with family.
The index measuring housing rose slightly to 108.7 in December, compared with 108.1 in November, with one-third of respondents expecting house prices to jump by more than 5 per cent in the coming year. That figure was higher in Dublin where data has shown growth in prices has been stronger in recent months.
“Rent expectations remained in positive territory in December and, as we head into 2017, it will be interesting to see how the newly-passed legislation capping rent increases at 4 per cent per annum in ‘pressure zones’ – Dublin and Cork city – feeds through to thinking,” Dr O’ Sullivan said.
Bank of Ireland also measures regional shifts in three-month moving averages. The regional pulses for December showed a mixed bag, with sentiment in Munster rising 2.5 points and falling 1.5 points in Connacht and Ulster. In Dublin and the rest of Leinster, sentiment was broadly unchanged.
There was a broad optimism in all regions apart from Dublin about the prospects for the economy this month, while all regions showed an upbeat mood about their own financial prospects.
