Tuesday 19 June 2018

Half of workers are set for pay rise as confidence grows

Bank of Ireland's group chief economist Dr Loretta O'Sullivan Photo: David Conachy
Bank of Ireland's group chief economist Dr Loretta O'Sullivan Photo: David Conachy
Gavin McLoughlin

Gavin McLoughlin

Nearly half of workers can expect a pay rise this year as more and more employers plan to hike wages.

That's according to Bank of Ireland's monthly Economic Pulse survey, which found firms in all sectors have lifted their expectations for business activity in January.

The January data shows that 44pc of businesses are planning on increasing basic wages over the coming 12 months, compared to 37pc at this time last year.

Bank of Ireland said the figure reflects the tightening of the labour market in the intervening period, as well as the higher national minimum wage that came into effect at the start of this year.

The report said 48pc of workers are expecting a pay rise.

"The mood music was positive this month, with data published by the CSO and the Department of Finance in recent weeks showing that the economy is doing well and that the public finances remain on track," said Dr Loretta O'Sullivan, group chief economist at Bank of Ireland.

"January also saw the changes to social welfare payments and income taxes announced in Budget 2018 come into effect, and while Brexit worries haven't gone away, they took more of a back seat this month as attention turned to a possible transition period.

"As a result, the Economic Pulse started the new year on a positive note, with consumer confidence posting a two-year high and business sentiment up on December's reading."

Consumer sentiment was boosted by the start of the post-Christmas sales. More than a quarter of respondents said they were likely to buy a car in the next 12 months. More than four in 10 said it was the right time to make major purchases (like furniture and electrical goods) compared to 34pc in December.

Households also upgraded their assessment of the economy in January, and to a lesser extent their own financial situation.

"While some of the improvement this month is due to seasonal effects, the Budget changes to social welfare payments and income taxes lined pockets in January, as did the rise in the national minimum wage, which helped lift the mood," Dr O'Sullivan said.

On housing, the report found that 48pc of respondents considered it a good time to buy and 59pc thought it was a good time to sell. With rents well above the boom-time peak, 71pc think it is cheaper to buy than rent in their area.

"The majority of Dublin households expect house prices and rents to increase in the next 12 months. The same goes for households outside of the capital. National house price inflation picked up during 2017 and was running at 11.6pc year-on-year in November," Dr O'Sullivan said.

"Price increases are being driven by fundamental factors like population growth and rising employment and incomes. The lack of supply is also an issue, though housebuilding activity is ticking up. The pace is just not fast enough to meet demand, which will put upward pressure on prices again this year."

Almost 30pc said they were likely to spend a large sum of money on home improvements in the year ahead.

The survey also breaks down sentiment by region and found that it had fallen month-on-month in Dublin, but was up in the rest of Leinster, in Munster and in Connacht/Ulster.

Last week, the Central Bank said the prospect of full employment was "in view".

"However, we cannot afford to be complacent as the economic growth we are projecting will not necessarily be plain sailing and is faced by real and varied risks. The small and open nature of our economy leaves us particularly vulnerable to the present uncertainty in the global taxation environment. Brexit continues to be the big unknown," the Bank said.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business