Consumer optimism at odds with business wariness

Bank of Ireland's latest Economic Pulse paints mixed picture

Irish households continued to feel positive about the economy in May, foreseeing rising house prices, falling unemployment and planning to spend more on their summer holidays.

Bank of Ireland's latest Economic Pulse also shows, however, that business sentiment was down, primarily due to the services sector.

The overall Economic Pulse for the month stood at 92.4, down slightly from 2.7 in April and falling sharply from 8.9 this time last year.

When it comes to consumers, household confidence held up "reasonably well" amid much activity on the international stage, including Theresa May calling a general election in the UK, the presidential election in France, Donald Trump setting out his tax plans and continued Brexit referendum fallout.

Some 27% of consumers expect to increase their spending on shopping trips over the coming year, with 38% planning big-ticket purchases on items such as furniture and electrical goods. One in five will spend more online.

Two in three are planning to spend the same or more on holidays this year compared with 2016.

Dr Loretta O’Sullivan, Bank of Ireland's group chief economist, said:

“With holidaying at home the preference for some, this bodes well for the tourist industry here."

One in two expect the unemployment rate to fall in the next 12 months. A massive four in five expects house prices to continue to rise, with 38% thinking the 12-month increase will be greater than 5%. Some 70% foresee rent hikes.

The softer Business Pulse reading owes much to a fall in services sentiment, which gave up last month's strong gains. Sentiment among industrial firms and retailers did tick up in May, however, while the construction sector put in a good performance. The main issue at present for builders is a shortage of labour, with a third finding it difficult to get workers.