Friday 23 February 2018

Brexit and Budget weigh on business and households

Finance Minister Paschal Donohoe. Photo: Conor McCabe Photography
Finance Minister Paschal Donohoe. Photo: Conor McCabe Photography
Colm Kelpie

Colm Kelpie

Confidence among businesses and households has taken a dip, pushing an economic gauge to a 10-month low, with the Brexit talks and next month's Budget being blamed.

Households are less positive about the economy and their own finances, while firms are more "subdued" about the prospects for business activity and hiring.

That's according to the latest Economic Pulse from Bank of Ireland, which has posted its lowest reading since November last year.

"Some nervousness in the run-up to the Budget may have been at play this month, while things are still up in the air with Brexit," said Dr Loretta O'Sullivan, group chief economist at Bank of Ireland.

"We will have to wait to see what measures the Government rolls out on Budget day. In the meantime, the solid economic and labour market performance in the second quarter is encouraging."

Data released by the CSO shows that the economy, in GDP terms, grew by 1.4pc in the three months to June compared with the previous quarter, and 5.8pc year-on-year.

Finance Minister Paschal Donohoe said the data provided clear evidence of continued momentum in the economy this year.

Economists argue that given the volatile nature of GDP in the Irish case, relying on employment data and consumer confidence gives a more reliable picture of what's taking place in the domestic economy.

The data from the latest Bank of Ireland report suggests sentiment among both consumers and firms is more subdued.

The Business Pulse fell for a second month running this month to 87.1, with sentiment down in the four sectors.

"The business mood was subdued again this month, with the industry, services, retail and construction pulses all losing ground," Dr O'Sullivan said.


"The UK's decision to leave the EU continues to be a concern, with the majority of businesses - led by those in Connacht/Ulster - expecting it to have a negative impact on the local economy in their region over the next 12 months."

The consumer pulse also lost ground, coming in at 95.3.

While this was down 3.7 on August's near-record high, it was up 1.6 on this time last year.

Bank of Ireland said households were more muted this month and scaled back their assessment of both the economy and their own financial situation.

Buying sentiment was also softer.

"Paying bills and the tax burden, along with the cost of renting and rising house prices, topped the list of household concerns this month. Meanwhile, on the savings front, 69pc indicated that they are likely to put some money aside over the coming year," Dr O'Sullivan said.

Regionally, sentiment among consumers and businesses was down in Dublin, the rest of Leinster, Connacht and Ulster, but up in Munster.

One-in-three firms in Connacht/Ulster and almost half in Dublin, the rest of Leinster and Munster rate the housing infrastructure in their region as inadequate.

"Firms in Dublin, the rest of Leinster and Munster also cited it as the priority area for investment - to help strengthen local economies and the business environment," she said.

The 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.

It is carried out by Ipsos MRBI on behalf of Bank of Ireland with 1,000 households and more than 2,000 businesses on a range of topics including the economy, their financial situation, spending plans, house price expectations and business activity.

Irish Independent

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