Bank of Ireland : Economic Pulse rallies in November, good news on COVID-19 vaccine lifts sentiment

Bank of Ireland Economic Pulse rallies in November, good news on COVID-19 vaccine lifts sentiment

• Three in five households plan to spend the same or more on Christmas presents this year
• Housing Pulse rises for seventh consecutive month
• Brexit uncertainty a drag on investment

The Bank of Ireland Economic Pulse stood at 67.0 in November 2020. The index, which combines the results of the Consumer and Business Pulses, was up 10.4 on last month but down 13.6 on a year ago.

A breakthrough on a COVID-19 vaccine lifted sentiment this month even as restrictions on social interactions and hospitality were tightened and non-essential retail / services businesses were closed. The lack of a breakthrough in the UK-EU negotiations is impacting investment though, with three in five firms for whom Brexit is a live issue indicating that they have put their plans for next year on hold.

Commenting on November's Economic Pulse, Dr Loretta O'Sullivan, Group Chief Economist for Bank of Ireland said: 'While the Economic Pulse rallied this month, it was very much a case of the good, the challenging and the endgame. The good being the news that a vaccine is on the way, which raised households' hopes that the economy will recover next year. The challenging being the current restrictions, though expectations that these will be relaxed for Christmas contributed to improved prospects for business activity. And the endgame being the intensive negotiations now underway between the UK and the EU on a post-Brexit deal, but with no white smoke, impacted firms have pressed the pause button on their investment plans.'

Consumer Pulse

'The breakthrough on a COVID-19 vaccine has raised households' hopes of economic recovery in 2021.'

• Consumer Pulse rises in November
• Highest reading since March
• Christmas spending down but not out

The Consumer Pulse came in at 60.3 in November 2020, up 11.8 on last month. A broad based improvement took the index to its highest level since March, though it was still 15.7 lower than a year ago. With virus cases trending down and encouraging developments on the vaccine front helping to reduce uncertainty about the recovery, expectations for the economy and jobs saw the biggest gains this month. The November survey also finds that three in five households are planning to spend the same or more on Christmas presents this year compared with last year. This figure usually runs at three in four however, indicating that consumers remain cautious on the whole.

Business Pulse

'While Level 5 restrictions are biting, the anticipated re-opening of the economy for Christmas lifted business sentiment.'

• Business Pulse increases in November
• Firms upgrade near-term expectations for business activity
• Retailers still cautious though

At 68.7 in November 2020, the Business Pulse was 10.1 higher than last month but 13.1 lower than a year ago. Sentiment was up on the month in the industry and construction sectors, neither of which have been directly impacted by the move to Level 5 of the 'Plan for Living with COVID-19', but also in the services sector which has been. The improvement in the latter reflects expectations that current restrictions will be eased over the festive season, with the positive vaccine news also contributing to a more upbeat assessment of business prospects. The Retail Pulse was little changed however, with the survey findings pointing to a more muted Christmas trading period than normal - one in two retailers expects their turnover to be the same or higher than last year versus 85% typically.

• Industry Pulse = 80.1 +6.5 points on the previous survey;
• Services Pulse = 63.9 +13.9;
• Retail Pulse = 71.3 +0.2;
• Construction Pulse = 77.1 +9.5.

Housing Pulse

'The Housing Pulse continued its upward trajectory in November, rising for a seventh consecutive month.'

• Housing Pulse up in November
• House price expectations in positive territory
• Same for rents

The Housing Pulse stood at 71.7 in November 2020, up 6.9 on October's reading but down 9.2 on a year ago. Households in Dublin, the Rest of Leinster, Munster and Connacht/Ulster were more upbeat about prospects for house prices this month, with the share expecting prices to increase over the next year coming in at 42%, more than double the share (20%) anticipating a fall. As for rent expectations, the balance of positive and negative responses was also in the black in all regions in November and a touch firmer at the national level on the month.

Regional Pulse

The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The 3 month moving averages show that sentiment was up across the board in November 2020.

Three month moving averages:

• Dublin Pulse = 68.2 +3.3 points on the previous survey;
• Rest of Leinster = 63.1 +1.6;
• Munster = 59.0 +1.9;
• Connacht/Ulster = 61.7 +3.8