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Economic confidence up in May but remains weak overall

Consumer and business sentiment rose slightly in May, albeit from a low base according to the latest Pulse survey from Bank of Ireland.

Consumer confidence was up marginally in the month, while all sectors of business saw an improvement. That came as improving data on the number of Covid-19 cases in Ireland continued to improve, while the Government roadmap offered a way forward for the country.

However the index remained low overall, having only recovered slightly from the record low seen in April.

“The Covid-19 shock is still keenly being felt by households and firms, what our May survey shows though is that the sudden and severe blow to sentiment may have bottomed out,” said Loretta O’Sullivan, chief economist with Bank of Ireland.

“When we look at what’s behind that, it looks as though efforts to contain the spread of the virus are bearing some fruit and the Government has set out a timetable to help society and business get up and running again.”

That appeared to have offered a light at the end of the tunnel for consumers and firms, making them feel slightly better about their prospects as a result.

“Households and firms are hoping that, as the restrictions are gradually lifted over the summer, the economy begins the process of healing and this has led to less pessimistic readings over the month,” Ms O’Sullivan said.

However the majority of consumers remained apprehensive about expenditure – with just one in six saying they were planning a ‘Big Ticket’ purchase.

At the same time three quarters said they would save over the next year – which could help lead to a spending boom eventually, though only if conditions allow.

“There may be pent up demand for certain goods and services, but there may also be some nervousness in the absence of a vaccine or in the absence of a treatment for sectors where there is more social contact,” Ms O’Sullivan said.

Some types of business that are more vulnerable to the spread of the virus are likely to see the least gain as things return to some level of normaility, with Ms O’Sullivan warning that the recovery will likely differ across sectors.

That is reflected in the Pulse data, with the services sector – which includes hospitality – more pessimistic than most.

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