A pullback in consumer and business confidence dragged Bank of Ireland's Economic Pulse lower in July.
With households feeling the pinch from inflation while also fretting about the economy and firms more circumspect about business activity, the series fell for a second consecutive month to a seventeen month low.
The Economic Pulse came in at 70.2 in July 2022, down 8.5 on last month's reading and 19.0 lower than a year ago.
The latest research took a look at wage expectations. The findings show that 44% of workers are anticipating a pay rise in the next twelve months (to the tune of 3½% on average), while just over half of firms are planning on increasing basic pay for their employees (by a little over 4% on average).
Dr Loretta O’Sullivan, Group Chief Economist for Bank of Ireland said a case of the summertime blues saw the Economic Pulse post a seventeen-month low in July.
"The pullback in sentiment this month was broad-based, with the Consumer Pulse falling below its Covid-19 nadir and the Industry, Services, Retail and Construction Pulses all losing ground."
Dr O'Sullivan said there were one or two bright notes in the July data though. "The share of firms struggling with material, equipment and space shortages was down a bit, and non-labour input costs – while still elevated - look to be stabilising, both tentatively pointing to some easing in supply chain strains.
"On the labour front, pay increases are in prospect as businesses look to retain and attract staff and workers find it easier to get or change jobs. But with an eye to competitiveness and reflecting greater economic uncertainty, wage expectations remain relatively contained," she said.
Households’ gloomier assessment of the economy and their own finances saw the Consumer Pulse hit an all-time low of 43.4 in July 2022.
Buying sentiment took a knock this month too, with just one in six considering it a good time to make major purchases like furniture or electrical goods and a record 64% saying that they are holding out on spending because they are not sure which way economic policy is going to go.
The Housing Pulse fell for a third month in a row. Interest rate hiking by the European Central Bank means higher mortgage repayments for some and may have contributed to the slippage in the share of respondents saying it is cheaper to buy than rent in the July survey (68% versus 76% in April).
