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Consumer and business sentiment are improving – but most strongly in Dublin

Tue, Oct 31, 2017, 00:01

Fiona Reddan

Consumers didn’t get that warm and fuzzy feeling from Minister for Finance Paschal Donohoe’s debut budget. Photograph: Cyril




Consumers may have been offered some relief in the form of (marginal) tax cuts in this month’s budget, but it wasn’t enough to send their economic confidence soaring, a new survey reveals.

According to the Bank of Ireland Economic Pulse, which polls both households and businesses on their financial situation and spending plans, consumer confidence and business sentiment was up by 1.7 from September to 90.5 in October, but it still remains four points lower than this time last year.

Dr Loretta O’Sullivan, group chief economist with Bank of Ireland, said that the uptick in sentiment looks to be “less of a budget bounce than an unwinding of last month’s temporary setback on the consumer side, and greater positivity among retailers, which may be partly related to the time of the year and firms hiring for the Christmas period”.

When looked at from a regional perspective, it seems that households and businesses in Dublin are the most upbeat, with sentiment down on the month in the rest of Leinster, Munster, Connacht and Ulster.

The survey shows that, overall, households are more positive about the economy and the outlook for unemployment this month; however, their assessment of their own financial situation was little-changed despite the small advances made in Budget 2018.

“As the budget day giveaways didn’t come as much of a surprise and were fairly modest, households’ assessment of their own financial situation was little changed this month, though there may be more of a reaction when the measures start to kick in,” Ms O’Sullivan said.

House prices

One area where there was more positivity – or negativity, depending on which side of the fence you sit on – is house prices. Households expect the upwards trajectory in both rents and house prices to continue, with more people now expecting annual price increases of more than 5 per cent.

Almost three-quarters of respondents in Dublin say now is a good time to sell a house, with just 40 per cent thinking it’s a good time to buy; this compares with national figures of 63 per cent and 49 per cent, respectively. This buoyancy in house prices is also feeding into people’s confidence to spend money on renovations; the survey shows that one in four is likely to spend a large sum of money doing up or renovating an existing property over the coming year.


While business sentiment improved on September, it is still lower than this time last year, weighed down by industry and services sentiment, as the data pointed to some softening in export orders for the coming three months. The weakness of the pound also remains a key concern, as does Brexit-related uncertainty. This will have a knock-on effect on consumers, with just two in five businesses indicating that they expect to increase basic pay over the next 12 months.

Given the weakness of the pound, Ms O’Sullivan said: “It is not too surprising that the Pulse results show some softening in competitiveness for firms in industry over the past three months.”

Index shows people less inclined to spend on holidays as Brexit and domestic politics take toll

Tue, Oct 31, 2017, 00:01

Francess McDonnell

Stormont: on hold. Photograph: Paul Faith/AFP/Getty Images




Political uncertainty and the absence of a Northern Ireland Executive has sent consumer confidence levels plummeting again in the North, according to new research.

The latest Danske Bank Northern Ireland Consumer Confidence Index shows people were less happy about their financial situation in the last quarter than they were 12 months earlier.

The index also illustrates that people may be less inclined to spend on “high value” items such as furniture or holidays in the coming year compared with their recent spending patterns and that the majority of households do not expect their financial position to improve over the next year.

As a result many expect they would be unable to save as much as they did previously.

Conor Lambe, Danske Bank economist said the survey shows that although many consumers said they were feeling the impact of persistent high inflation this year, the biggest negative impact was directly linked to the ongoing political uncertainty in the North.

Brexit effect

Mr Lambe added: “Unsurprisingly, some consumers said that Brexit was having a negative impact on their confidence levels, while others said it was affecting them positively.

“Of the factors having a positive impact on confidence levels, 22 per cent of people mentioned low interest rates. Many people, particularly those with variable rate borrowings, will be watching future monetary policy announcements closely as the Bank of England’s Monetary Policy Committee looks set to raise interest rates relatively soon.”

According to Danske Bank a significant percentage of residents of Northern Ireland – particularly part-time workers, homemakers, retired people and unemployed people – believe their financial position has deteriorated over the past year.

In contrast, however, people with full-time jobs or students believe they are better off than they were a year ago.

According to Danske Bank the over-65s are among the least optimistic in the North about their financial position next year.

But Northern Ireland’s younger population appears to be the most confident about their future finances: 27 per cent of 16- to 24-year-olds and 26 per cent of 25- to 34-year-olds expect their finances to improve in the next 12 months.

Unemployment declining as consumer spending and corporate earnings rise

about 12 hours ago

With euro-zone inflation still below its goal of just under 2 per cent, the ECB will continue to buy public and private debt through September 2018. Photograph: Kai Pfaffenbach/Reuters




Euro-area economic confidence surged to its highest in almost 17 years, reflecting an improved outlook for a region that not long ago was blighted by record joblessness and a double-dip recession.

The index of industry and consumer sentiment rose to 114 in October from a revised 113.1 the previous month, the European Commission in Brussels said on Monday. That’s the gauge’s fifth consecutive monthly increase and the strongest reading since January 2001. It compares with a median estimate of 113.3 in a Bloomberg survey.

After the past decade dealt the euro area two prolonged economic slumps, a sovereign debt crisis and an almost-exit of Greece from the single currency, the 19-nation region is experiencing a growth revival. Unemployment is declining and consumer spending, as well as corporate earnings and investment, are on the rise.

Better performances in countries from the United States and Canada to Russia and India have also buoyed that upswing.

“In big-picture terms we’re still in a period of above-trend growth,” said Nick Kounis, an economist at ABN Amro Bank NV in Amsterdam. “One of the things which has changed for the better in the last, say, six to nine months has been a marked improvement in the global growth backdrop, and that has been very important for Europe.”

Manufacturing sector

The export-oriented manufacturing sector has been a beneficiary of the turnaround, with a purchasing managers’ index gaining in recent months. Companies in that branch took on staff at the fastest pace on record in October. Sentiment increased across all sectors, according to the European Commission.

The euro was little changed after the report and traded at $1.1633 on Monday morning. Data on Tuesday is expected to show the bloc’s economy expanded for the 18th consecutive quarter in the three months through September.

The unemployment rate is forecast to have fallen to 9 per cent last month, compared with a high of more than 12 per cent back in 2013. Germany, the region’s largest economy, is headed for its fastest annual expansion since 2011, and the better local and international dynamics have been reflected in company earnings.

As for Spain, which was particularly buffeted by job losses, unemployment fell to a nine-year low in the third quarter amid economic growth of 0.8 per cent, providing some good news for the government as it tries to get a grip on the political crisis in Catalonia. Still, economy minister Luis de Guindos said he’s anticipating a slowdown in the region that may have ripple effects for the broader Spanish economy.

European Central Bank president Mario Draghi took note of the euro area’s improved prospects last week, saying the region was “doing pretty well.” Yet, faster momentum has been slow to push up domestic cost pressures, and Draghi stressed that a “prudent” as well as “patient and persistent” approach toward exiting the quantitative-easing programme was warranted so as not to undermine the recovery.

With inflation still below its goal of just under 2 per cent, the ECB will continue to buy public and private debt through September 2018, albeit at half the current monthly rate of €60 billion, it announced on October 26th.

“Growth is growing and momentum is also growing and the labour market and everything is doing well,” Draghi told reporters after the decision. While data constituted grounds for confidence about the region’s prospects, “this confidence is also tempered by the fact that we know that all this process, it still relies very much on our monetary-policy support,” he said. – (Bloomberg)

Chris Johns: The chances of no deal on Brexit keep rising with the passage of time

about 8 hours ago

Chris Johns

Theresa May: One of the more astonishing aspects of the Brexit process is the persistence with which the UK government keeps negotiating with itself rather than Brussels. Photograph: Reuters/Francois Lenoir




According to the tabloids and the headbanger wing of the Tory party, to voice doubt about the wisdom of Brexit is akin to treason. Judges and anyone else who point out that there is a long and growing list of problems are denounced as “enemies of the people”.

Anyone who muses about the possibility of a second referendum is treated as if he or she is suggesting regicide: if Brexiteers had their way a journey through the Tower of London’s Traitor’s Gate would be the appropriate punishment.

Brexit has two enemies beside the (growing) number of people who don’t want it to happen. The billionaire owners of British newspapers are going to have to find ways to stop the passage of time and reverse the rules of logic.

The EU is a Customs Union which requires, with no ambiguity or subtlety, an external border. When the UK leaves it requires a border with the EU. That means a Border between the Ireland and the UK.

As Pascal Lamy, the former EU commissioner and secretary general of the World Trade Organisation (WTO ) said this week, the only question is where you put it: either on this island or somewhere in the Irish Sea. The latter option appears to be ruled out by our friends in the North, so logic implies a land Border. There will be trade frictions and security implications; the only debate is over their nature and size.

Current talk is of a “transition period”; a predetermined length of time that enables all of the necessary negotiations to take place and systems designed to put into effect all those new customs arrangements. These will be the first trade negotiations in world history designed to raise rather than lower trade barriers.


Britain probably leaves the EU in name only in 2019 and then transitions to Brexit-proper a number of years into the future. The logical problem with transition is that it usually requires some idea of what you are transitioning to.

Both sides of this debate can see transition for what it is – Brexit delayed. Business in particular has realised that what this means is that the cliff edge is merely postponed.

The British government is incapable of describing in any way what Brexit will actually look like. The only safe business strategy is to hope for the best but plan for the worst.

One of the more astonishing aspects of the Brexit process is the persistence with which the UK government keeps negotiating with itself rather than Brussels. There is now widespread agreement that ideologues are now holding the country to ransom. Prominent commentator Robert Peston thinks the UK is displaying all the hallmarks of a country experiencing a collective nervous breakdown.

Moving people and activities out of the UK is now a bit like all of those disaster recovery plans that most businesses have in place in case the office or factory burns down. An alternative place of business is prepared and paid for as a kind of insurance policy.

Disaster recovery

Business planning for Brexit can be seen in this light: disaster recovery. But it’s not like having a back-up office in Sandyford for your main business in the IFSC. Most normal disaster recovery policies assume that the move to new accommodation will be temporary. Brexit is about how you move out of the UK into the EU permanently.

And it is a much bigger deal: traditional disaster recovery plans do not involve buying up school places in foreign countries.

EU president Donald Tusk recently laid out the logic: Britain can have a good deal, no deal or not do Brexit. But the other enemy of the process is now coming into play: time.

Theresa May continues to dither over which of these three choices she wants to make. Of course it’s worse than this because, held hostage by her headbangers and the Daily Mail, she maintains that her only choice is deal or no-deal. It really is a game show. As time runs out, plans for no deal have to be made: again it is a matter of logic. Even the EU itself has now quietly begun disaster recovery preparations.

Negotiating power

Ivan Rogers, formerly Britain’s top official in Brussels, this week told a select committee of the UK parliament that the key moment when May lost her negotiating power was when she triggered article 50. In his words Britain is now “screwed” in the negotiations with zero leverage. All of the power rests with the EU27. In other words, the only people who can define what a “good deal” looks like are all in Brussels.

Logic and the passage of time means that the only way a transition can now be agreed is if May accepts what the EU will, sooner or later, offer her. How she sells that deal to the Brexiteers is tough – possibly even impossible – to imagine.

The chances of no deal, logically, keep rising with the passage of time.

Fed could soon be in the hands of somebody who never learns anything or forgets anything

about 10 hours ago

the Fed cut interest rates to zero and “printed money” on a huge scale during the financial crisis.




Last week John Kelly, the White House chief of staff, tried to defend President Donald Trump against charges that he was grossly insensitive to the widow of a US soldier killed in action.

In the process, Kelly accused Frederica Wilson, the member of Congress and friend of the soldier’s family who reported what Trump had said, of having behaved badly previously during the dedication of an FBI building. Video of the dedication shows, however, that Kelly’s claim was false, and that Wilson’s remarks at the ceremony were entirely appropriate.

So Kelly, a former general and a man of honour, admitted his error and apologised profusely. See? I made a joke! In reality, of course, Kelly has neither admitted error nor apologised. Instead, the White House declared that it’s unpatriotic to criticise generals – which, aside from being a deeply un-American position, is ludicrous given the many times Donald Trump has done just that.

But we are living in the age of Trumpal infallibility: We are ruled by men who never admit error, never apologise and, crucially, never learn from their mistakes.


Needless to say, men who think admitting error makes you look weak just keep making bigger mistakes; delusions of infallibility eventually lead to disaster, and one can only hope that the disasters ahead don’t bring catastrophe for all of us.

Which brings me to the subject of the Federal Reserve. What? The truth is that what I’m calling Trumpal infallibility – the insistence on clinging to false ideas and refuted claims, no matter what ? is a disease that infested the modern Republican Party long before Trump. And one of the areas where the symptoms are especially severe is monetary policy.

You see, when the 2008 financial crisis struck, the Federal Reserve, led at the time by Ben Bernanke, took extraordinary action. It cut interest rates to zero and “printed money” on a huge scale – not literally, but it bought trillions of dollars’ worth of bonds by creating new bank reserves.

Many conservatives were aghast. TV pundits hyperventilated about hyperinflation, and even seemingly more respectable voices denounced the Fed’s actions. In 2010 a who’s who of conservative economists and pundits published an open letter warning that the Fed’s policies would cause inflation and “debase the dollar.” But it never happened.

In fact, the Fed’s preferred measure of inflation has consistently fallen short of its target of 2 per cent a year. Now, every economist makes bad forecasts now and then – if you don’t, you’re not taking enough risks.


I’ve certainly made my share, including a bad market call on election night – which I retracted three days later, acknowledging that my political dismay had gotten the better of my analytical judgment. But I always try to face up to my mistakes and learn from them. But I guess I’m just old fashioned that way.

Four years after that open letter to Bernanke, Bloomberg tracked down many of the signatories to ask what they had learned. None of them – not one – was even willing to admit having been wrong. So what happens to economists who never admit mistakes, and never change their views in the light of experience?

The answer, apparently, is that they get put on the short list to be the new Fed chair. Consider, for example, the case of Stanford’s John Taylor (one of the signatories of that open letter). Unlike some of the other names on the rumored list, he’s a highly cited academic economist.

Since the financial crisis, however, he has repeatedly demanded that the Fed raise interest rates in line with a policy rule he devised a quarter-century ago. Failing to follow that rule was supposed to cause inflation, which it hasn’t – but seven years of being consistently wrong hasn’t inspired any rethinking on his part.

What it has inspired is a descent into increasingly strange reasons the Fed should raise rates despite low inflation. Easy money, he declared, was part of a conspiracy to “bail out fiscal policy,” that is, an effort to help president Barack Obama.


Or maybe it was like the monetary equivalent of rent control, discouraging lending the way rent control discourages building apartments – a bizarre analysis that had colleagues scratching their heads.

What these ever-odder interventions had in common was that they always offered some reason wrong was right – why Taylor had been right to warn against easy-money policies even though higher inflation, the problem he predicted as a result of these policies, never materialised. And never, ever, an admission that maybe something was wrong with his initial analysis.

Again, everyone makes forecast errors. If you’re consistently wrong, that should certainly count against your credibility; track records matter. But it’s much worse if you can never bring yourself to admit past errors and learn from them.

That kind of behaviour makes it all too likely that you’ll keep making the same mistakes; but more than that, it shows something wrong with your character. And men with that character flaw should never be placed in positions of policy responsibility.

Structural deficit cuts in Italy, France, Portugal and Belgium fall short of requirements

Fri, Oct 27, 2017, 20:30

EU: told Italy, France, Portugal and Belgium on Friday their 2018 draft budget plans posed risks to meeting debt and deficit reduction targets.




The European Commission warned Italy, France, Portugal and Belgium on Friday that their 2018 draft budget plans posed risks to meeting EU debt and deficit reduction targets, while it also asked Spain for an updated budget draft that contains more information.

In letters addressed to each of the five governments, the commission pointed out that the reduction in their structural deficits – the budget balance that strips out business cycle swings in revenue and expenditure and one-off items – fell short of what EU rules required.

The letters are part of the EU’s budgetary rules, which give the EU executive arm the right to check if draft national budgets are constructed in line with EU laws that put limits on budget deficit and debt.

Spain has promised to send an updated version of an earlier draft, which was made on a no-policy-change basis, as soon as it goes to the Spanish parliament. The commission said it wished to “highlight the importance of a timely submission”. – (Reuters)

Car sales plummet 18% as a weak pound prompts higher used-car imports from UK

Fri, Oct 27, 2017, 11:29

Fiona Reddan

The weakness of sterling has led to higher used-car imports from the UK. Photograph: Barry Batchelor/PA Wire




Retail sales, excluding cars, rebounded in September, as consumers came back from summer holidays and spent on back to school expenses.

Car sales plummeted by 18 per cent however, as a weak sterling is leading to a spike in used car imports from the UK.

The latest figures from the Central Statistics Office show that in September, retail sales fell by 2.4 per cent in the month, but when the sale of cars are excluded, retail sales rose by 1.3 per cent when compared with August 2017.

On an annual basis, sales rose by 1.2 per cent in the year to September, or by 7.7 per cent when car sales are excluded.

Pointing to renewed growth in the housing market, the sectors with the largest monthly volume increases were furniture & lighting (4.7 per cent), electrical goods (3.4 per cent) and other retail sales (2 per cent).

The biggest month on month volume decreases were motor trades (-18 per cent) and clothing, footwear & textiles (-3.1 per cent).

Fall in unemployment

Alan McQuaid, economist with Merrion Capital, expects continued growth in retail sales, boosted by the continued fall in unemployment.

“We are now forecasting headline retail sales volume growth of 3.5-4.0 per cent in 2017,” he said, adding that the increase in “core” sales is projected to be as high as 6.5 per cent on the year.

Davy Research economist David McNamara said the data suggested consumer spending grew strongly in the third quarter and “should be a key contributor” to economic growth this year.