Confidence amongst Irish consumers falls sharply over Russian invasion

'The uncertain geopolitical situation is a headwind for GDP growth and living costs in Ireland,' said Bank of Ireland chief economist Loretta O’Sullivan. File Picture: Larry Cummins

Consumer confidence has fallen sharply over rising inflation and the fallout from the Russian invasion of Ukraine a new survey has found.

Nine in ten households now think that consumer prices will rise in the next 12 months — up from 82% in February according to Bank of Ireland's Economic Pulse survey.

The consumer section of the survey stood at 56.7 in March, 14.5 lower than last month’s reading and 13.1 lower than a year ago. Heightened uncertainty saw households take a more downbeat view of economic and employment prospects for the coming year this month, while soaring energy prices in the wake of Russia’s invasion of Ukraine added to cost of living woes.

"The uncertain geopolitical situation is a headwind for GDP growth and living costs in Ireland," Loretta O’Sullivan, group chief economist for Bank of Ireland said. 

Much will depend on the duration of the conflict and on the actions of policymakers, factors which will also shape sentiment among households and firms in the period ahead. 

The Business Pulse came in at 91.3 in March, down 1.1 on last month but 16.7 higher than a year ago.  The picture was mixed this month though, with the Services Pulse rising as the post-restrictions rebound continued, whereas the Retail Pulse slipped and the Industry and Construction Pulses fell significantly against the backdrop of the Russian-Ukraine war. 

Firms in all sectors were more circumspect about the three-month outlook for business activity with 83% reporting that their non-labour input costs had increased in recent months. Even so, over a third (35%) indicated that they expect to spend more on investment this year compared with last year.

“The Business Pulse dipped in March as the lifting Covid fog was overshadowed by geopolitical headwinds," Ms O'Sullivan said.

The Regional Pulse which takes the views of households and firms around the country show that sentiment was up in Dublin and Munster, broadly unchanged in the rest of Leinster, and down in Connacht/Ulster.