Sentiment lifts post-Omicron as workers gear up for pay hikes

Irish business and consumer sentiment rose in January as fears about the likely impact of the Omicron variant receded. And nearly half of workers are anticipating a pay rise in the next 12 months.

Bank of Ireland’s latest Economic Pulse index, which tracks business and consumer sentiment, rose by nearly five points to 84.5 in January and was tracking almost 23 points above the level recorded this time last year.

The report said the improvement was linked to the acceleration of the vaccine booster campaign and signs that the Omicron wave of the virus may be less severe and relatively short-lived .

Households sounded a brighter note about the economy, while firms were more optimistic about near-term prospects for business activity, it said.

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Against a backdrop of high inflation and a tightening labour market, the January research also took a look at wage expectations for 2022. The findings showed that 46 per cent of workers are anticipating a pay rise in the next 12 months (of just over 3 per cent on average), while half of companies – a series high – are planning on increasing basic pay for their employees (by 4 per cent on average).

The bank’s chief economist, Loretta O’Sullivan, said: “The Economic Pulse was on the front foot this month as Omicron fears receded, with both the consumer pulse and the business pulse re-gaining some of the ground they lost late last year.

“ Households and firms were cautiously hopeful that the peak of the virus wave was nigh and that restrictions would be gradually eased through February. So the Government’s announcement on January 21st that virtually all public health measures were to be removed more or less immediately came as something of a surprise,” she said.