Consumers were less optimistic in October with Brexit weighing on households, while business sentiment remained steady as companies prepare to scale up and give pay rises.

Those are the findings of Bank of Ireland's latest 'Economic Pulse' survey, which also suggests the Irish economy is starting to reach full capacity, which would likely put upward pressure on both wages and prices.

Bank of Ireland's Group Chief Economist Dr Loretta O'Sullivan said overall sentiment this month was "fairly flat.

"But when you break it down you do see a sharp drop in consumer sentiment, while business sentiment was a little bit firmer on the month.

"For the consumer piece this took place during the Budget. The measures that came through though in the Budget - there was some reductions in income tax, there was some increases on the social welfare side ... they were fairly modest, they were fairly well signalled.

"So they didn't have that much of an 'oomph' effect in terms of the consumer and the reaction was fairly muted," she said.

However, Dr O'Sullivan added that "what really came through this month was Brexit". She said this led to consumer sentiment "taking a nosedive".

With regard to the stronger business sentiment for October in the Economic Pulse, she said they reacted sooner than consumers to Brexit and factored in their pessimism a number of months ago.

According to the latest Economic Pulse, 44% of businesses are planning pay rises with a third of companies looking to scale up.

The BoI Chief Economist said while businesses are more bullish about the outlook, certain sectors such as retail and construction are still seeing lower sentiment.

"If you take for example the footfall is falling, online sales are increasing - that's having an impact on some of the high street stores, particularly the big UK chains which also have a presence here.

"For the construction firms, they're also looking at things like the market adjusting to the macro-prudential rules and some softening in house prices." Dr O'Sullivan said.

The BoI research also suggests industrial firms are using around 76% of the resources available to them, meaning the economy is now close to full capacity.

Dr O'Sullivan said "it's telling us that firms in industry they're using about 76% of the available resources, so things like equipment and materials.

"Back in the lowpoint of the crisis in 2011 they were using about 65% - so that's gone up about ten percentage points."

She said with the growth these companies are "beginning to bump up against some barriers" and "what we see coming through in our surveys is that construction firms, builders are also talking to the fact that they have a shortage of workers".

"This all suggests that we're moving towards capacity in terms of the economy, that we're starting to bump up against constraints, which then brings to the fore pressures and concerns around where wages and prices might go."