Bank of Ireland’s economic performance tracker fell to a four-year low through March. The Economic Pulse index was 70.4, down 16.0 on February and 19.0 lower than a year ago.
With the Covid-19 pandemic in full flow, consumer and business confidence took a significant knock in March.
The bank noted that its surveys were taken before the government lockdown announcements, with the result that further sharp falls will be likely in next month’s reading.
“The March survey findings give an initial feel for how the Covid-19 pandemic is playing out in economic terms,” said Loretta O’Sullivan (pictured), Bank of Ireland’s group chief economist. “Overall they paint a bleak picture, with the Economic Pulse plunging to a new low and registering a larger monthly drop than after the Brexit referendum result.
“The Business Pulse also posted a series low in March with the services sector leading the charge downward, while on the consumer front worries about the economic outlook were to the fore. Looking ahead, the school closures and other restrictions that have been put in place to contain the spread of the virus mean that this month’s weak prints are likely only the tip of the iceberg.”
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Business Pulse
The bank’s Business Pulse fell 18.6 in March 68.4, the weakest print in the series’ four year history. The Services Pulse was down sharply on the month (-25.8) and the Retail and Construction Pulses also saw steep drops (-14.3 and –12.2 respectively), while the Industry Pulse was little changed (+1.6).
With the government's response to the C-19 pandemic cratering business activity, the bank said that companies in all sectors significantly marked down their expectations for business activity over the coming three months. Hiring plans were scaled back too, especially n the retail sector.
Households also markedly downgraded their assessment of the economy’s prospects for the coming year and are also more circumspect about their personal finances going forward. Households have also scaled back their expectations for future house price gains, though the balance of responses remained in positive territory.
Meanwhile, accountancy firm EY has speculated on two economic scenarios on the potential economic impact of the C-19 pandemic.
The firm estimates a contraction of 7.3% in GDP in its base case scenario. A more prolonged period of economic restrictions lasting throughout the summer could result in a 13.1% contraction, according to EY modelling.
Job losses are projected to be 177,000 in EY’s base case scenario, but over 450,000 jobs are expected to be either lost or furloughed during the most severe phase of the pandemic whilst businesses are shut. These numbers rise to 318,000 and 675,000 respectively in the prolonged outbreak scenario.
EY partner Graham Reid commented: “We are hosting regular webinars to help support clients through this crisis. In one of the polls taken during a webinar we could gauge the massive financial strain that businesses are anticipating with a significant number telling us that their revenues will be impacted by more than 25%.”
EY economist Neil Gibson mused that after the crisis, the economy is likely to be forever altered.
“The embedding of technology to allow remote working has been rapidly accelerated, as has the adoption of online ordering,” he stated. “This will create opportunities for businesses in the future, although increased homeworking would clearly be challenging for the high street and transport companies.
“Many workers have seen meetings dropped from the diary or condensed into a shorter online format, and there are stories of a resulting boost to efficiency and productivity. The need to socialise and the importance of face to face contact will remain, but undoubtedly our ways of working will look different when the pandemic eases.”
