Consumer sentiment stabilized somewhat after a sharp loss of confidence during the spring of May, according to the Bank of Ireland’s monthly Economic Pulse, but increased costs are beginning to undermine business competitiveness.
He said families were feeling somewhat more confident about the economy and their own finances than in recent months because of new government spending to address lower unemployment and higher cost of living.
But companies still don’t feel overly optimistic, with nearly 60 pc saying they are finding it difficult to get a clear understanding of how business conditions are likely to develop in the coming months.
“After a hat-trick of declines, Consumer Pulse staged a rally this month,” said Bank of Ireland chief economist Loretta O’Sullivan.
“Houses are now getting €200 electricity credits and many are also benefiting from the reduction in public transport fares. However, increased costs remain a challenge for businesses, with indications that these are beginning to affect competitiveness as evident in recent survey data. ,
The Bank of Ireland said households remain primarily cautious, but a higher-than-normal proportion are planning to spend larger on holidays this summer, indicating strong buying sentiment.
However, while the consumer share of the economic pulse was slightly higher month-on-month, the reading is still well down compared to last year, due to novel concerns about inflation, supply chain problems and the uncertainty launched by Russia’s invasion of Ukraine. reflects the risks.
Persistent inflation is causing headaches for businesses across sectors, with non-labour input costs reporting an increase of 87 per cent in the past three months. About two-thirds were expecting the selling price to increase, also indicating that cost pressure would eventually be passed on to consumers. However, the number of plans to raise prices fell, possibly reflecting the onset of competition concerns.
Higher consumer prices are also starting to affect housing sentiment, with fewer respondents expecting a bigger increase in home prices.
“With the European Central Bank gearing up to raise interest rates in response, affordability is likely to be on the radar for existing and potential homeowners here in the coming years,” the bank said.
