Key changes to be made before easing restrictions

Lockdown restrictions and the impact on consumer spending, as well as the construction and services sectors

Lockdown dealt a heavy blow to many sectors since March last year. The shutdown of the hospitality and services sectors alone was one of the heaviest hits. Consumer spending data suggests significant pent-up consumer demand which will be unlocked once restrictions are eased.

Lockdown dealt a €2bn hit to construction output in 2020 – report

The initial shutdown of the construction sector for seven weeks during the initial stages of the Covid-19 pandemic knocked €2bn off construction output last year.

That is according to a report carried out by EY DKM on behalf of the Construction Industry Federation.

Analyzing official data, the report concluded that the shutdown – which started on 27 March – led to a contraction in the value of construction output of around 7.3% to €24.7bn.

It estimates that the contraction this year will be of the order of €3bn.

On the housing front alone, that translates into an estimated decline of close to 5,000 housing completions in 2021 bringing the total to 16,000, compared with the total for 2020 of 20,676.

Services activity tumbles after new lockdown – PMI

The country’s services sector contracted last month at the sharpest rate since the economy was emerging from an initial Covid-19 lockdown last May after the Government imposed its toughest restrictions in nine months.

Most building sites, shops, and the hospitality sector were closed from late December after a four-week reopening led to a huge surge in Covid-19 infections, hospital admissions, and deaths.

The curbs may be lifted only gradually from March 5.

The AIB IHS Markit Purchasing Managers’ Index (PMI) for services tumbled to 36.2 in January from 50.1 in December.

Activity has only fallen at a sharper rate twice on record, in May and April 2020, when the PMI sank to a record low of just 13.9.

Flash surveys last month for the eurozone as a whole and the UK showed activity in their services sectors had fallen to similar levels amid widespread restrictions.

Big consumer rebound expected after Q1 lockdown – Goodbody

The unleashing of €13 billion in household savings and significant pent-up demand will lead to a surge in consumer spending that will fuel a 5% growth in core domestic demand this year, new research from stockbroker Goodbody says.

In his latest economic forecast, chief economist Dermot O’Leary predicts that domestic demand will fall between January and March.

But he said recovery will begin as the Covid-19 vaccine rollout leads to the easing of restrictions, probably sometime in the second quarter.

Today’s report anticipates that this strong recovery will moderate a little next year, growing 3.5% in 2022. The report says it could be by September before 70% of the population required to achieve herd immunity is vaccinated, but mortality risks will begin to fall earlier as vulnerable groups are immunized, allowing a gradual reopening of the economy from April and onwards.

For the latest updates on the Lockdown please visit the Mark Kennedy & Co news page.