Irish Economy and Budget Watch / / /Emergency Budget Announced for April 7th

Another positive economic story to beat back them ESRI blues. Our indigenous sector is doing very well. Look to the below-linked article for more!

Enterprise Ireland firms beat target

Ooh!!! This Monday's going to be a treat for Irish economy-watchers like ourselves. Look at the CSO release calendar, it's like Christmas Day!

Monday 30th June

[]National Income and Expenditure, Annual Results for 2007

[]Quarterly National Accounts, Quarter 1 2008

[]Balance of International Payments, Quarter 1 2008

[]External Debt, 31 March 2008

[]Census 2006 - Non-Irish Nationals Living in Ireland

[]Report on Response Burden placed on Irish Business by CSO inquiries, 2007

Looking forward to your summary, Ard-Taoiseach

cactus flower wrote:

Looking forward to your summary, Ard-Taoiseach

Thanks cactus. It'll be very interesting to see the overall state of play when we receive that welter of statistical data. I'd be hoping the economy stays in growth in Q1, the 5.3% growth figure for 07 is maintained(or increased) and the BOP deficit demonstrates a further re-balancing towards equilibrium.

Right, I've quoted myself to give headings to my summary.

Ard-Taoiseach wrote:

Ooh!!! This Monday's going to be a treat for Irish economy-watchers like ourselves. Look at the CSO release calendar, it's like Christmas Day!

Monday 30th June

[]National Income and Expenditure, Annual Results for 2007

Very good stuff here. GDP growth for 2007 was revised up to 6% for last year while GNP was revised down to 4.1%. This is particularly sweet since I said as far back as October last year that the most likely GDP growth rate for Ireland was 6%.

What's also interesting in the figures is the further revision upwards of 2005 growth. That was put at a provisional 5.5% in 06 before being upgraded to a 5.9% in 07. That figure has been further upgraded to 6.4%. 2005 is an unappreciated year of economic vigour.

We also now have ten grand more to each and every one of our names compared to 2002.

[]Quarterly National Accounts, Quarter 1 2008

Not so much cheer here. GNP shrank by 1.5% in the first quarter while GNP managed to eke out a 0.8% advance. I wouldn't be over-excited by these figures since Q1 2007 was a particularly impressive period. The economy grew by at least 8.4% during that time. As a result of this any weakness in this quarter could be magnified by the comparative strength of last year's performance. If Q2 is of similar complexion, serious questions would be raised about our economic performance.

[]Balance of International Payments, Quarter 1 2008

The current account is still disappointing since it remains in deficit and increasingly so. The absolute deficit is down to €3.622 billion from €3.676, but as a percentage of GDP has risen. We need to see this figure reach parity by this time next year.

[]External Debt, 31 March 2008

Our external debt continues to rise. It has increased to nearly €1.56 trillion from €1.526 trillion at the end of last year. The increase was largely driven by Monetary Financial Institutions.

[]Census 2006 - Non-Irish Nationals Living in Ireland

420,000 non-Irish nationals in the country at the time of the last Census coming from 188 countries. The CSO have some interesting facts in this regard:

CSO wrote:

Two thirds of all Chinese were living in the greater Dublin area compared with fewer than 1 in 5 Latvians, who favoured large and medium sized towns instead.

Half of UK nationals and just over a third of German nationals were living in rural areas.

The Chinese and the French had the highest proportion of single people (69% and 71% respectively), while two thirds of Nigerians and Filipinos were married.

Thirteen per cent of Latvian females were divorced (the highest of all groups) while 8 per cent of UK males were re-married following divorce.

Polish males had the highest percentage at work (91%) while over 1 in 5 Nigerian males were unemployed.

Lithuanian males had the highest percentage at work in the construction sector (37%), while the US had the greatest proportions in the higher socio-economic groups of professionals and managers (19%).

[]Report on Response Burden placed on Irish Business by CSO inquiries, 2007

This is a little dull, so I'll just leave a link here if anyone wants to read it.

So nobody cares about this momentous day of economic news and statistics? The economy grew by 6% last year, 6%! It's powerful stuff.

Great reporting Ard-Taoiseach. Does GNP include construction ?

cactus flower wrote:

Great reporting Ard-Taoiseach. Does GNP include construction ?

Thanks very much, I'm particularly chuffed that I accurately estimated the growth of the economy all the way back in October.

GNP does include construction and the depressed nature of construction last year was the principal reason it lagged so far behind GDP in terms of growth.

I'm really happy with the upward revisions of growth in both the last quarter of 2007, 2007 as a whole and for 2005. It seems that the economic circumstances are better than we previously thought and the economy is even larger than we had believed previously.

This means that we have even greater cushion dealing with this year's weakness and leaves us in a good position for a full rebound in 2009.

Another welter of economic news released today;

Manufacturing sector weakens further

Consumer mood never lower

Small and Medium-sized businesses at their gloomiest in 20 years

Commercial property in trouble

I was surprised to hear someone on RTE who should have known better (economist, I think) repeat the nonsense that Ireland's boom was based on construction. The construction boom was caused mainly by foreign investment combined with the coming of age of the baby boom generation. There was a supply shortage of housing and the pressure on construction was piled on by ill considered tax incentives and infrastructural work. At a certain point, around 2004, it went from boom to bubble as the real wealth generating employment flattened off and government poured the proceeds into public employment and infrastructural projects. Profit levels were high and the banks then threw a pile of loans at developers just at the point when the game was up.
Pop!

A higher interest rate might have helped, particularly in the last three years. Also there is the interesting question of whether the banks were paying out bonuses or otherwise pressuring their staff to lend money for development.

cactus flower wrote:

I was surprised to hear someone on RTE who should have known better (economist, I think) repeat the nonsense that Ireland's boom was based on construction.

Yes, surprise is the correct reaction to that utter nonsense that Ireland's boom is based on construction. Ireland's economic boom began with the fiscal policy reform of 1987 and was given the name, 'Celtic Tiger' in 1994. The construction sector only came into play in 2004, fully a decade after the boom was given its name and 17 years after it was inaugurated.

Quote :

The construction boom was caused mainly by foreign investment combined with the coming of age of the baby boom generation. There was a supply shortage of housing and the pressure on construction was piled on by ill considered tax incentives and infrastructural work. At a certain point, around 2004, it went from boom to bubble as the real wealth generating employment flattened off and government poured the proceeds into public employment and infrastructural projects. Profit levels were high and the banks then threw a pile of loans at developers just at the point when the game was up.
Pop!

Well, yes. I would argue that the real value of Irish housing is 2001-2 prices allowing for inflation of about 3% p.a. since. The Economist and IMF saw approximately 33% over-valuation back in early 2007. It is natural for a degree of excess to enter into the equation when we are in an era of economic exuberance. About half of the over-valuation has been drawn from Irish property so it should see a recovery within the next 18 months when fair value is reached.

Quote :

A higher interest rate might have helped, particularly in the last three years. Also there is the interesting question of whether the banks were paying out bonuses or otherwise pressuring their staff to lend money for development.

That is the curse of our euro membership. We have had the wrong interest rate since 2002 and it is to the credit of the Irish economy that we have not experienced truly awful consequences as a result of our mis-directed monetary policy. We needed to maintain high interest rates throughout this decade to preserve the very low inflation of the Nineties. It is for this reason that I am quite doubtful of the merits of Ireland joining the €uro. I feel that we could be doing better outside the €urozone and have a healthier economic balance than we do now.

Ard. Why not indulge in some speculation on the mini budget. Over yonder they seem unable to grasp the size of the problem.

youngdan wrote:

Ard. Why not indulge in some speculation on the mini budget. Over yonder they seem unable to grasp the size of the problem.

I think they need to re-evalute the NDP capital projects pronto. We had a much healthier economy back in 2002 when we had no infrastructure. Overhasty and badly planned infrastructural projects contributed substantially to pushing up building costs and this knocked on to house prices. The only projects that should go ahead are those that benefit education and "log jam" water services for cities and towns that have run out of capacity.

It would be criminal to sign off on an uncosted Metro North - for billions we would get Stephen's Green wrecked and a line running through the leafy suburbs of Drumcondra.

Government has spent over 30 million on greyhound stadia that look as though they are government headquarters designed by Richard Rogers. All that kind of lunacy could be cut out.

What they should do is build some social housing. There are thousands of families without houses and we are heading for a serious shortage with the private sector at a standstill. They might as well do it as keep skilled builders on the dole.

http://www.indymedia.ie/article/88082

This is a report on the proposed closure of an important language training centre used by refugees in Dublin. It sounds as though its purpose was both education and to help people integrate economically and socially: 500 people marched against its closure on 20th June. As a side note, the building they were supposed to be moving to in Kilbarrack I think must be the former comprehensive school that Roddy Doyle taught in - now closed and empty. A whole functioning and experienced specialist corps of teachers will be scattered to the four winds and people who might otherwise have made a productive contribution to the work force will experience a setback. At the same time the blah blah blah about integration and education will go on.

This is precisely the sought of mindless, "easy picking" and non-strategic cut I suppose we should expect from FF - the same sort of thing FG did in the 1980s.

Is there any possibility we could do better this time, as a rake of FDI is not going to come along again to dig us out of the hole we are in, we're going to have to do it ourselves.

The Live Register for June was published today.

Unemployment according to the Register stands now at 5.7%, up from 5.4%. The number on the Register is up a seasonally-adjusted 10,100. It isn't going in the right direction.

Full report here

Ireland will not be the "first country to enter recession" since Denmark has already taken that title. Based on Spain's performance, I think they'll be in recession before us. Denmark is in recession, look here.

cactus flower wrote:

What they should do is build some social housing. There are thousands of families without houses and we are heading for a serious shortage with the private sector at a standstill. They might as well do it as keep skilled builders on the dole.

If there is money for social housing then buy up some houses on the cheap in the private sector. The advantage would be dispersal of such accommodation and it would help get the housing sector stabalised. If you allocate more money and take the traditional route it will be 5 years before the houses are occupied.

Link: Sunday Business Post Article by FT Correspondent

This article makes for grim reading. Wolfgang Munchau will be surprised if property values don't fall by at least 50%. Interestingly, he attacks the notion that property values rise. I have to say I was a bit depressed by this.

Indeed, I would probably sell my own house apart from the fact that I would lose the benefit of a good tracker rate, mortgage interest relief and my first time buyer stamp duty reduction.

Irish Times: BoI Economist forecasts 6% unemployment

[Dan McLaughlin] said the rapid slowing in GDP had come as a surprise and was due to the construction sector contraction and the “sudden slowing in services exports is the other unexpected development”, adding that these exports dominate Irish GDP.

What "services exports" is he talking about?

Zhou_Enlai wrote:

Irish Times: BoI Economist forecasts 6% unemployment

[Dan McLaughlin] said the rapid slowing in GDP had come as a surprise and was due to the construction sector contraction and the “sudden slowing in services exports is the other unexpected development”, adding that these exports dominate Irish GDP.

What "services exports" is he talking about?

The lesser spotted migratory call centre ?

Certain types of banking facilities - á la IFSC - may be defined as such.

Some tentatively encouraging economic releases from the CSO this week;

Industrial production surges 9.3%

Irish people shrug off doom and gloom and go on more holidays

2006 Census of Building and
Construction

Some good news on the jobs front today, almost 100 jobs were created down Audi's way.

99 jobs created by 3 companies

They're all very high-quality jobs which will add to the clustering effect down there.

The building trade took another tumble in business conditions today:

NCB Construction Sector PMI