Economic Outlook December 211 Chief Economist Dan McLaughlin
11q3(e) 11q1 1q3 Global growth has slowed this year... Global Growth (%) 6 4 2-2 -4-6 1q1 9q3 9q1 8q3 8q1 7q3 7q1 World US Euro
And OECD expects weaker 212... 211 212 213 World 3.8% 3.4% 4.3% US 1.7% 2.% 2.5% UK.9%.5% 1.8% Euro 1.6%.2% 1.4%
21/11/11 21/9/11 21/7/11 21/5/11 Oil price rise partly responsible... Brent ($/bl) 13 12 11 1 9 8 7 6 21/3/11 21/1/11 21/11/1 21/9/1 21/7/1 21/5/1
Incomes still generally below pre-recession levels Path of GDP (27q4 = 1) 12 1 98 96 94 92 9 88 86 84 8q1 8q3 9q1 9q3 1q1 1q3 11q1 11q3 US UK Euro Ireland
Market expects rates to stay low 3-month Rate (%) 1.8 1.6 1.4 1.2 1.8.6.4.2 US Euro UK current Dec-12 Dec-13
But credit premium on Euro rates has risen sharply 3 2.5 2 1.5 1.5 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
.92.9.88.86.84.82.8 2/12/211 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 1.5 1.45 1.4 1.35 1.3 1.25 1.2 15/7/211 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)
Irish Growth surprises to upside this year... 3 2 1-1 -2 Irish GDP Growth (quarterly, % change) -3 9q1 q2 q3 q4 1q1 q2 q3 q4 11q1 q2
So growth forecasts for 211have moved up, and risks for 212 largely external 29 21 211(e) 212(f) Consumption -6.9 -.8-2.5-1. Government -4.5-3.8-3.5-2. Capital Formation -28.7-24.9-1.5 2.5 Exports -4.2 6.3 5. 3.5 Imports -9.3 2.7 2. 2. GDP -7. -.4 1.5 1.6 GNP -9.8.3 1. 1. 1
As exports main engine of growth 15 1 5-5 -1 Irish External Trade Volume (% annual change) -15 8q1 8q3 9q1 9q3 1q1 1q3 11q1 Exports Imports
Irish monthly indicators implying modest growth ex construction... Irish PMI's 7 6 5 4 3 2 6q1 7q1 8q1 9q1 1q1 11q1 Manufacturing Services Construction
Employment still falling but may be close to bottom... Change in Employment ('s, s.a.) 1 8q1 8q3 9q1 9q3 1q1 1q3 11q1-1 -2-3 -4-5 -6-7 -8
Net emigration may be overstated given census surprise 8 6 4 2-2 -4 Net Migration ('s) -6 21 23 25 27 29 211
Consumers have faced squeeze on real incomes, but surprise rise in pay in q3 Annual change in Wages and Prices (%) 4 3 2 1-1 -2-3 -4-5 -6-7 Boost to real incomes Squeeze on real incomes 9q1 9q3 1q1 1q3 11q1 11q3 Weekly earnings Consumer prices
Credit still contracting 25 2 15 1 5 Credit Growth (% annual change) -5 8q1 8q3 9q1 9q3 1q1 1q3 11q1 11q3 Mortgage Non-Financial Corporate
Irish Property prices still falling but residential rents rising of late... Peak Change from peak Latest 3 months CSO: Residential Property Sept 27-45.4% -5.2%(Oct/11) CSO: Dublin Feb 27-53.1% -8.7% (Oct/11) Residential Rents (CSO) Q1 28-23.% +2.1%(Oct/11) IPD Commercial Q3 27-65.% -4.6%(Sept/11)
Scale of fiscal deficit constraint on policy options 15 1 5-5 -1 Irish Exchequer Borrowing Requirement (bn) -15 26 27 28 29 21 211(e) 212(f) Current Capital
Budget trend now improving Tax and Day-to-Day Spending (% annual change) 2 15 1 5-5 -1-15 -2-25 -3 7q1 7q3 8q1 8q3 9q1 9q3 1q1 1q3 11q1 11q3 Voted Current Tax revenue
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