Economic Outlook. December Dan McLaughlin. Chief Economist

Transcription

1 Economic Outlook December 211 Chief Economist Dan McLaughlin

2 11q3(e) 11q1 1q3 Global growth has slowed this year... Global Growth (%) q1 9q3 9q1 8q3 8q1 7q3 7q1 World US Euro

3 And OECD expects weaker World 3.8% 3.4% 4.3% US 1.7% 2.% 2.5% UK.9%.5% 1.8% Euro 1.6%.2% 1.4%

4 21/11/11 21/9/11 21/7/11 21/5/11 Oil price rise partly responsible... Brent ($/bl) /3/11 21/1/11 21/11/1 21/9/1 21/7/1 21/5/1

5 Incomes still generally below pre-recession levels Path of GDP (27q4 = 1) q1 8q3 9q1 9q3 1q1 1q3 11q1 11q3 US UK Euro Ireland

6 Market expects rates to stay low 3-month Rate (%) US Euro UK current Dec-12 Dec-13

7 But credit premium on Euro rates has risen sharply Euro 2-year Swap Rates 29/1/11 29/8/11 29/6/11 29/4/11 28/2/11 29/12/1 29/1/1 Swap rate Swap Spread

8 /12/211 4/11/211 7/1/211 9/9/211 12/8/211 Dollar strength rather than euro weakness is main FX development Dollar and Sterling per Euro /7/211 17/6/211 2/5/211 22/4/211 25/3/211 25/2/211 28/1/211 31/12/21 3/12/21 5/11/21 8/1/21 1/9/21 13/8/21 16/7/21 18/6/21 21/5/21 US Dollar(LHS) Sterling (RHS)

9 Irish Growth surprises to upside this year Irish GDP Growth (quarterly, % change) -3 9q1 q2 q3 q4 1q1 q2 q3 q4 11q1 q2

10 So growth forecasts for 211have moved up, and risks for 212 largely external (e) 212(f) Consumption Government Capital Formation Exports Imports GDP GNP

11 As exports main engine of growth Irish External Trade Volume (% annual change) -15 8q1 8q3 9q1 9q3 1q1 1q3 11q1 Exports Imports

12 Irish monthly indicators implying modest growth ex construction... Irish PMI's q1 7q1 8q1 9q1 1q1 11q1 Manufacturing Services Construction

13 Employment still falling but may be close to bottom... Change in Employment ('s, s.a.) 1 8q1 8q3 9q1 9q3 1q1 1q3 11q

14 Net emigration may be overstated given census surprise Net Migration ('s)

15 Consumers have faced squeeze on real incomes, but surprise rise in pay in q3 Annual change in Wages and Prices (%) Boost to real incomes Squeeze on real incomes 9q1 9q3 1q1 1q3 11q1 11q3 Weekly earnings Consumer prices

16 Credit still contracting Credit Growth (% annual change) -5 8q1 8q3 9q1 9q3 1q1 1q3 11q1 11q3 Mortgage Non-Financial Corporate

17 Irish Property prices still falling but residential rents rising of late... Peak Change from peak Latest 3 months CSO: Residential Property Sept % -5.2%(Oct/11) CSO: Dublin Feb % -8.7% (Oct/11) Residential Rents (CSO) Q % +2.1%(Oct/11) IPD Commercial Q % -4.6%(Sept/11)

18 Scale of fiscal deficit constraint on policy options Irish Exchequer Borrowing Requirement (bn) (e) 212(f) Current Capital

19 Budget trend now improving Tax and Day-to-Day Spending (% annual change) q1 7q3 8q1 8q3 9q1 9q3 1q1 1q3 11q1 11q3 Voted Current Tax revenue

20 Disclaimer Bank of Ireland is regulated by the Central Bank of Ireland. Bank of Ireland incorporated in Ireland with limited liability. Registered Number - C-1. Head Office, Mespil Road, Dublin 4, Ireland. This document has been prepared by Bank of Ireland Global Markets ( GM ). This document is for informational purposes only and GM is not soliciting any action based upon it. Any information contained herein is believed by the Bank to be accurate and true but the Bank expresses no representation or warranty of such accuracy and accepts no responsibility whatsoever, other than any responsibility it may owe to you under the European Communities (Markets in Financial Instruments) Regulations 27 as may be amended from time to time, for any loss or damage caused by any act or omission taken as a result of the information contained in this document. No prices or rates mentioned are bids or offers by GM to purchase or sell any currencies, securities or financial instruments. Except as otherwise may be specifically agreed, GM has not acted nor will act as a fiduciary, financial or investment adviser with respect to any derivative transaction that it has executed or will execute. Any investment, trading and hedging decision of a party will be based on its own judgement and not upon any view expressed by GM. This document does not address all risks related to the transactions described. You should obtain independent professional advice before making any investment decision. Any expressions of opinion reflect current opinions as at 8 th December 211 and are subject to change without notice. This publication is based on information available before this date. This document is property of GM. The content may not be reproduced, either in whole or in part, without the express written consent of a suitably authorised member of GM staff.