Irish News

Bank of Ireland Economic Pulse rises in February

By Business & Finance
22 February 2021

46% of households think the economy will get better over the coming year, with firms more upbeat about the outlook for business activity and hiring

The Bank of Ireland Economic Pulse came in at 68.6 in February 2021. The index, which combines the results of the Consumer and Business Pulses, was up 7.0 on last month but 17.8 lower than a year ago.

With the Government announcing that Level 5 restrictions would remain in place until early March and implementation difficulties in respect of the new trading arrangements with the UK, households and firms were downbeat about the here and now this month. They sounded a more positive note on the outlook for the economy and commerce however, helped by the deployment of COVID-19 vaccines with more due to arrive.

Commenting on February’s Economic Pulse, Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said: “The Economic Pulse rose in February as vaccine-related optimism offset lockdown fatigue and post-Brexit headaches. Both consumer and business sentiment were up on the month as households and firms looked towards the economic recovery now that the vaccine roll-out is underway.

“Of course, it will be a while before we get back to ‘normality’ and it may be that some of the pandemic-induced changes to the way we live, work and shop persist, with longer lasting implications for the economy. More e-commerce and increased remote working will require further investment in telecommunications infrastructure for example. Indeed, 36% of the firms surveyed this month identified telecommunications as the priority area for investment in their region, which is double the pre-COVID figure.”

Consumer Pulse

Households were more sanguine about prospects for the economy and jobs this month.

  • Consumer Pulse rebounds in February
  • Buying sentiment ticks up
  • Savings intentions still elevated

Having started 2021 on a soft note, the Consumer Pulse rose in February; coming in at 67.2. This was 6.8 higher than last month’s reading but down 16.8 on a year ago. While the extension of the public health measures saw households lower their assessment of the current economic situation this month, progress on the vaccination front lifted recovery hopes and the headline index. 46% now think the economy will get better over the coming year (35% in January) and two in five expect unemployment to fall (three in ten last month).

This month’s survey also looked at households’ savings and investments. The results show that deposit/savings accounts continue to dominate but that interest in financial assets like shares and in property has increased a little. Two in five indicated that they consider it a good time to invest in such things (typically it’s a third), with a search for returns in the current low interest rate environment likely part of the explanation.

Indeed, 36% of the firms surveyed this month identified telecommunications as the priority area for investment in their region, which is double the pre-COVID figure.

Business Pulse

While the tighter restrictions are biting, firms appear to be looking beyond them to the re-opening of the economy.

  • Business Pulse recovers some ground in February
  • Infrastructure headwinds
  • Eight in ten firms expect Brexit to negatively impact their region

After last month’s drop, the Business Pulse was firmer in February 2021. At 69.0, the index was 7.1 higher than in January but down 18.0 on a year ago. The underlying picture was mixed this month though. Firms were downbeat about the recent trading period as the extension of Level 5 restrictions at home, and fresh measures across the Euro area, added to post-Brexit disruption (businesses in the industry and services sectors reported a further deterioration in export order books in February). But with some re-opening of the economy expected in the coming months as virus cases come down and inoculations go up, they were more upbeat about the outlook for business activity and hiring.

This month’s research also examined the broader operating environment that businesses across the different regions face. While the results point to a high level of satisfaction among firms with basic infrastructure such as water, waste and energy; housing emerges as the priority area for investment in Dublin, with telecommunications infrastructure topping the list elsewhere.

Priority area for investment to strengthen the local economy and business environment (% of firms in each region):

Dublin Rest of Leinster Munster Connacht/Ulster
Transport 25% 15% 22% 26%
Telecommunications 29% 40% 35% 42%
Basic infrastructure 13% 14% 13% 11%
Housing 33% 31% 29% 21%

Housing Pulse

“Three in five households think house prices will go up in the next 12 months.”

  • Housing Pulse rises in February
  • Tenth consecutive gain
  •  Now at a 20-month high

The Housing Pulse stood at 93.3 in February 2021, up 6.8 on January’s reading and 8.6 higher than a year ago. The improvement in sentiment this month was broad based across the regions – households in Dublin, the Rest of Leinster, Munster and Connacht/Ulster all upped their expectations for future house price increases – taking the   national series to its highest level since the summer of 2019.

Regional Pulse

The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The indices are calculated on a 3 month moving average basis and show that sentiment was down a little in Dublin but up in the Rest of Leinster, Munster and Connacht/Ulster in the December to February period compared with the November to January period.

Three month moving averages:

  • Dublin Pulse = 68.4                       -0.9 points on the previous survey;
  • Rest of Leinster = 67.9                  +0.7;
  • Munster = 64.9                               +2.3;
  • Connacht/Ulster = 65.4                +0.6.

About the Bank of Ireland Economic Pulse:

The Bank of Ireland Economic 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, a Europe-wide sentiment study running since the 1960s. The Economic Pulse surveys are conducted by Ipsos MRBI on behalf of Bank of Ireland with 1,000 households and approximately 2,000 businesses on a range of topics including the economy, their financial situation, spending plans, house price expectations and business activity.