Energy woes send economic sentiment into downward spiral

Economic Pulse fall in September represents record low for consumer confidence.

Consumer confidence and business sentiment plunged to 70.6 in September 2022 due to the ongoing energy and cost of living crisis, down 1.8 on August and 17.6 lower than a year ago.

With Europe experiencing disruption to gas flows from Russia, markets on edge and several providers here announcing further gas and electricity price increases, energy matters were to the fore this month.

“The unsettled environment also tempered business sentiment, while concerns about the ability of Ireland and other European countries to keep the lights on this winter appear to have prompted some re-assessment of infrastructure needs.”

Anxiety over bills weighed on households’ mood, while security of supply as well as cost concerns saw basic infrastructure – energy, water and waste – move up businesses’ priority list for public investment.

The Bank of Ireland Economic Pulse survey is conducted in conjunction with the European Commission, with the data feeding into the EU Commission’s Joint Harmonised EU Programme of Business and Consumer Surveys, a Europe-wide sentiment study running since the 1960s. The Economic Pulse surveys are conducted by Ipsos on behalf of Bank of Ireland with 1,000 households and 1,350 businesses on a range of topics including the economy, their financial situation, spending plans, house price expectations and business activity. 

“Economic sentiment was down this month amid an intensification of energy woes,” said Loretta O’Sullivan, group chief economist with Bank of Ireland.

“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. The unsettled environment also tempered business sentiment, while concerns about the ability of Ireland and other European countries to keep the lights on this winter appear to have prompted some re-assessment of infrastructure needs.

“When firms were asked to identify the priority area for investment, one in five said basic infrastructure which covers energy, water and waste. 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.” 

Business Pulse

“The uncertain backdrop tempered the business outlook this month,” O’Sullivan surmised.

The Business Pulse stood at 77.7 in September 2022, down 0.7 on last month and 12.3 lower than a year ago. While the sectoral Pulse readings were a mixed bag this month, firms were generally more circumspect about near-term prospects for activity given the unsettled environment, with two thirds saying it is difficult to predict the future development of their business situation at present.

September’s research also took a look at infrastructure priorities from a business perspective and finds that housing remains in pole position (42% of firms cited it as the key area for investment), followed by transport (23%), energy, water and waste (19%), and telecommunications (15%).

  • Industry Pulse = 86.0 ( +5.0 points on the previous survey;
  • Services Pulse = 77.4 (-4.3)
  • Retail Pulse = 73.7 (+8.5)
  • Construction Pulse = 74.6 (-1.4)

Consumer Pulse

“A broad-based pullback saw the Consumer Pulse hit a fresh low in September,” O’Sullivan said.

At 42.1 in September 2022, the Consumer Pulse was down 6.3 on August’s print and 38.9 lower than a year ago. Households were more apprehensive about the economy and job prospects this month, and with energy bills for all and mortgage repayments for some on the rise, they were gloomier about their personal finances too.

One in three is just managing to make ends meet according to September’s survey, though this varies across the income distribution – the figure for households at the bottom end was 53% for example, compared with 16% for those at the top end.

Housing Pulse

“Housing infrastructure remains the number one priority area for investment,” O’Sullivan warned.

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.

Regional Pulse

The Bank of Ireland Regional Pulses bring together the views of households and firms around the country. The indices are calculated on a 3 month moving average basis and show that sentiment was down across the board in the July to September period compared with the June to August period.

Three month moving averages:

  • Dublin Pulse = 81.0 (-0.6 points on the previous survey)
  • Rest of Leinster = 66.3 (-3.1)
  • Munster = 68.4 ( -4.7)
  • Connacht/Ulster = 67.5 (-3.4)
John Kennedy
Award-winning editor John Kennedy is one of Ireland's most experienced business and technology journalists.