Consumer confidence in Ireland has hit new lows as the public grow more apprehensive about the economy, with energy bills and mortgage repayments on the rise.
One in three households are ‘just managing’ to make ends meet, according to Bank of Ireland’s latest Economic Pulse survey. The figure rises to 53% for households at the lower end of income distributions.
At 42.1 in September, the consumer sentiment pulse was the weakest reading on record, down 6.3 on August and 38.9 lower than a year ago.
“With households facing the prospect of even higher gas and electricity bills over the coming months, consumer confidence sank to an all-time low in September,” Loretta O’Sullivan, group chief economist for Bank of Ireland, said.
Households are expected to come under further pressure in the weeks and months ahead, with mortgage interest rates to rise on the back of two rate increases by the European Central Bank, with two further increases expected before the end of the year.
The survey’s business pulse was down slightly in September, with firms more circumspect about near-term prospects for activity, given the unsettled environment.
Two-thirds of companies said it was difficult to predict their business situation. September’s research also looked at infrastructure priorities from a business perspective and found that housing remains in pole position, with 42% of firms citing it as the key area for investment, followed by transport (23%), energy, water and waste (19%), and telecommunications (15%).
“When firms were asked to identify the priority area for investment, one in five said basic infrastructure, which covers energy, water, and waste,” Ms O’Sullivan said.
“This category has traditionally been at the bottom of the list in our survey, but moved up the pecking order this month, ahead of telecommunications, though it failed to dislodge housing from the top spot."
There is likely to be little let-up on the impact of inflation, when new data is released in Ireland and the EU on Friday. Euro-area inflation probably hit another record last month, just short of 10%, keeping the heat on the European Central Bank as it considers how aggressively to raise interest rates.
Prior readings having given a key impetus to expand tightening at the past two ECB meetings, and the new report is likely to be one of the most important ingredients in the next decision, due in a month’s time.
The regional pulse, which brings together the views of businesses and households on a provincial basis, saw the biggest drop in confidence among those in Munster, down 4.7 points, followed by Connaught/Ulster, which saw a 3.4 drop, while Dublin held steady.
The housing pulse came in at 99.8 in September 2022, down 1.6 on last month and 19.1 lower than a year ago. Survey respondents pared back their expectations for future house-price gains this month, but with demand continuing to outstrip supply, 65% still think they will increase over the coming year, versus 68% in August.
Housing infrastructure is important from a quality-of-life standpoint and also has a role to play in facilitating new ways of working and attracting staff from abroad, meaning investment in this area is relevant for firms as well as households.