Central Bank Q4 Bulletin

The latest quarterly bulletin from the Central Bank is available here.

22 replies on “Central Bank Q4 Bulletin”

Credit still contracting baby – although it may have stabilised over the summer but it could just be a blip.


Where is JtO when you need him?

JTO again:

Have no fear, Joseph. I am at work, which is totally unrelated to this stuff. I hope to have time tonight, or tomorrow night at the latest, to look at the Central Bank figures in more detail. My immediate reaction is one of great disappointment with the Central Bank forecasts, as my bet with Paddy Power that ESRI’s migration forecast would win the annual ‘Worst Forecast of The Year’ competition has now gone up in smoke.

The 2.4% growth for 2011 as against 4% used in the budget projections is going to make it essential for significant extra cuts/taxes

Interesting figures on household saving. It seems that households are back to 2007 levels of debt to income and debt to assets. Bad enough, but they have been worse in the interim.

But where is the State? Back to 1988 levels of debt soon i fear.

These figures make no sense. How are they generating these numbers?

In the first page of results of the report, on page 6 of the statistical appendix (119 of pdf) the figures make no sense. For example the other loans figure for July 2010 is €11,110 million, and the corresponding growth rate is given as -21.5%; but this doesn’t tally with the previous month’s figure, €11076 mil, or the figure for the previous year, €6,192 mil. Most of the figures on the page don’t seem to match the raw numbers given.

And some of the raw figures seem unbelievable to me. On page 43(156), Irish non financial institutions are rated as having assets of €594 billion. Considering GDP was around ~€200 billion perhaps. But then Irish financial institutions are rated as having ~€3.344 trillion in assets. That’s ~3.3 x 10^12, yes 12, euros.

This seems an impossible sum. It’s comparable to the US federal budget. Taxed at 1.5%, it would pay the government operating costs for the year. The Insurance companies and pension funds account for only ~€277 billion of it. By the way, the liabilities are even higher at ~€3.364 x 10^12.

These figures are too high to be taken seriously, and I suspect them to be essentially meaningless; the product of nebulous accounting practices and questionable valuation rules. These monies do not exist.

But what do I know? I know little to nothing about finance; I’m just a mathematician. No doubt this all makes perfect sense to the people who don’t have to pay all these bills.

The faith that some people have in Central Bank forecasts is very touching. Presumably these are the people who rush to the bookies when Eamonn Dunphy issues his Premiership forecasts.

The Central Bank made its first forecast for 2010 GDP in its 2009 Q2 bulletin. It forecast that GDP would fall by 3.0% in 2010. Now, it is saying that it will rise by 0.2% in 2010, a turnaround of 3.2%. Actually, it is likely to be a lot higher. But even on their admitted error of 3.2% in their initial forecast for 2010, what possible reason is there for taking their current forecast for 2011 with anything more than a pinch of salt?

Every forecast that the Central Bank has made for GDP growth in 2010 in its quarterly bulletins has been radically revised in the next bulletin. The sequence is as follows:

CB forecast for 2010 GDP in 2009 Q2 bulletin: -3.0%
CB forecast for 2010 GDP in 2009 Q3 bulletin: -2.7%
CB forecast for 2010 GDP in 2009 Q4 bulletin: -2.3%
CB forecast for 2010 GDP in 2009 Q1 bulletin: -1.0%
CB forecast for 2010 GDP in 2009 Q2 bulletin: -0.5%
CB forecast for 2010 GDP in 2009 Q3 bulletin: +0.8%
CB forecast for 2010 GDP in 2009 Q4 bulletin: +0.2%

The latest one is the first to be revised down, an absurd overreaction to the freak Q2 GDP figures. It will almost certainly be revised back up in the next bulletin.

The main reason for the repeated revisions in the GDP forecasts is revisions to their forecasts for exports volume growth in 2010. The sequence is as follows:

CB forecast for 2010 export growth in 2009 Q2 bulletin: -1.9%
CB forecast for 2010 export growth in 2009 Q3 bulletin: -1.3%
CB forecast for 2010 export growth in 2009 Q4 bulletin: -0.3%
CB forecast for 2010 export growth in 2009 Q1 bulletin: +1.4%
CB forecast for 2010 export growth in 2009 Q2 bulletin: +2.0%
CB forecast for 2010 export growth in 2009 Q3 bulletin: +3.3%
CB forecast for 2010 export growth in 2009 Q4 bulletin: +5.4%

So, in 2009 Q2, the Central Bank was forecasting that the volume of exports would fall by 1.9% in 2010. It has revised its forecast up in every bulletin since then. Now, it is saying that it will rise by 5.4% in 2010, a turnaround of 7.3%. After each bulletin, I have ridiculed their forecast for export growth as far too low. They have duly proved me right every time by revising it up every time. But, it is still far too low.

In the first half of 2010, the volume of exports was 6.8% higher than in the first half of 2009. As the second half of 2009 was weaker than the first half of 2009, if the volume of exports in the second half of 2010 simply remained at its level of the first half of 2010, and didn’t continue the growth shown in the first half of 2010, the 2010 rise over 2009 would be 7.2%, not the 5.4% the Central Bank is predicting now. For its latest forecast to prove accurate, the volume of exports would have to be 3.6% lower in the second half of 2010 than in the first half of 2010. Not a shred of evidence has been produced in the bulletin to suggest that this is likely. In the past week, we’ve had the first CSO figures for exports in the second half of 2010. July merchandise exports were about 10% higher than their average for the first half of 2010. So, clearly the latest Central Bank forecast for exports in 2010 is yet another turkey. Nothing is more certain than that it will be revised up yet again (for the seventh consecutive time) in the next bulletin.

All this radically affects the GDP forecast. If all the other parts of the Central Bank forecast prove accurate (consumer spending, investment etc), then each 1%, by which exports volume growth exceeds the 5.4% increase forecast in 2010, results in GDP growth exceeding the 0.2% forecast by 1% also. As I said above, in the first half of 2010, the volume of exports was 6.8% higher than in the first half of 2009. If that is repeated in the second half of 2010, then, if all the other parts of the Central Bank forecast prove accurate, the increase in GDP will be 1.6%, not 0.2%. The latest revised-down forecast of a 0.2% rise in GDP in 2010 is wholly dependent on, not just a slowdown in the growth of exports, but an actual fall of 3.6% in exports in the second half of 2010 as compared with the first half. This was always unlikely, but the July merchandise trade figures make it absurd.

Some of the other forecasts in the body of the Central Bank bulletin are so patently ridiculous, that one wonders what they were on. Take the forecast for manufacturing output growth in 2010. The Central Bank are forecasting that this will rise by just 2.6% in the full year 2010 over the full year 2009. The index of manufacturing output in Ireland in 2009 was 101.7. A 2.6% rise in 2010 brings it to 104.4. But, in the first seven months of 2010, it averaged 111.6. For the Central Bank forecast of an abysmal 2.6% rise in manufacturing output in 2010 to prove accurate, manufacturing output in August-December 2010 has to fall to 94.0, more than 20% below its allready published July 2010 level, bringing it well below its level at the lowest point of the recession. In other words, for the Central Bank forecast for growth in manufacturing output in 2010, an abysmal 2.6%, to prove accurate, manufacturing output has to, not just stop growing as it has done up to now in 2010, but to go completely into reverse and fall at nearly six times the quarterly rate by which it fell in late 2008/early 2009 when the global recession was in full swing.

It all simply highlights the abysmal quality of economic forecasting in Ireland. ESRI can’t forecast migration levels anywhere near accurately. The Central bank can’t forecast growth in key sectors of the economy anywhere near accurately. It is time that the government looked into it. Since they seem to be bringing someone over from England for various functions in to do with regulation, I suggest that they do the same for forecasting. The Central Bank and ESRI aren’t up to it.

So, everything is great about the irish economy apart from our ability to forecast it.
John, you are too harsh on the Irish. Who is able to produce consistently good forecasts of any economy? certainly not the OECD or IMF or Fed, or ECB or MPC or NIESR. Consistently good forecasts are never, ever produced by anybody. You know that.


Thanks for the numbers John! On manufacturing and production indices I tend to note what you come up with …….


Yes I remember that Sept 10, 2009 comment. ‘spose we are all fallible when it comes to forecasting ……… and we might all be thankful at times that one does not do U-Tube from the blog ……….

@Karl Whelan

If you bothered to check the facts, you’d find that I was the only one to forecast this time last year that GDP in Ireland would record positive growth in 2010. This time last year, the Central Bank, ESRI, DoF, IMF, OECD, EU Commission, Uncle Tom Cobley and all, were forecasting that GDP would fall by 3% to 4% in 2010. Where are they now? You should be elated that the only correct forecast in the world in 2009 that GDP in Ireland would record positive growth in 2010 was made on your blog. It is a big feather in your cap.

Also, you will recall that I correctly predicted from China/Vietnam in early August 2009 that the tax take in 2009 would be very close to Minister Lenihan’s revised target of around 33 billion, while Brian Lucey was claiming that it would be below 30 billion. Talking of which, are we going to have a thread on the September exchequer figures? I also forecast in July that net emigration in the year to April 2010 would be around 35k, on the same day that ESRI forecast that it would be 70k.

Regarding my forecast for 2009 Q2 and Q3, the quarterly falls in 2008 and 2009 were: 2008 Q1: -2.7%, 2008 Q2: -1.8%, 2008 Q3: -0.3%, 2008 Q4: -4.6%, 2009 Q1: -2.1%, 2009 Q2: -0.1%, 2009 Q3: -0.3%. At the time, only the figures up to 2009 Q1 had been published, and the consensus was that the quarterly falls would continue at that rate every quarter up to the end of 2009 and into 2010. I correctly predicted that they wouldn’t. I narrowly missed out on my forecast that GDP would record positive growth in 2009 Q2 and Q3. The actual falls in those quarters were 0.1% and 0.3%, far below the falls in the previous five quarters. The original CSO estimate for 2009 Q3 was +0.3%, since revised down to -0.3%. Revisions take place all the time, some up, some down. It is well within the bounds of possibility that those small falls in GDP could be revised up to small rises.


Consistently good forecasts are never, ever produced by anybody.

JTO again:

This is clearly true. All forecasts are subject to uncertainty.

But then it raises the matter of why taxpayers pay economists to make forecasts, if they turn out not to be worth the paper they are printed on. Wouldn’t it be more productive to have them working in McDonalds?

Then, there is the scale of the error and the timing of the forecast.

ESRI’s forecast of 70k net emigration in the year to April 2010 was published in July 2010, ie AFTER the period in question was over. By that stage, the CSO had allready published its QNHS up to 2010 Q1. From these, it was very easy to estimate net emigration in the year to February 2010. The figure to April was never going to be significantly different. Using the QNHS, I estimated net emigration at around 35k in the year to February 2010, almost identical to what the CSO reported for the year to April 2010. If you asked me to forecast the level of net emigration in the year to April 2011, I could not do it now. It is in the future. But, if you ask me in July 2011, I’d certainly be able to estimate it to within a few thousand using the figures from the QNHS series. Anyone could. Except ESRI. Why don’t you hold me to that in July 2011?

The Central Bank’s forecast of an abysmal 2.6% increase in manufacturing output is beyond the limits of what is acceptable for forecasting error. We allready have the figures up to July 2010. There is no way the full year increase will be as low as 2.6%, on the basis of these figures. It is the economic equivalent of forecasting that Port Vale will beat Man Utd 9-8, when Man Utd are 8-0 ahead midway through the second half.

I’ll issue a challenge.

These are the CSO manufacturing output figures fror 2008 and 2009 to date:

Jan 2009: 108.5
Feb 2009: 104.8
Mar 2009: 108.2
Apr 2009: 106.7
May 2009: 104.3
Jun 2009: 106.6
Jul 2009: 107.0
Aug 2009: 91.8
Sep 2009: 101.5
Oct 2009: 99.0
Nov 2009: 91.3
Dec 2009: 90.7
Jan 2010: 110.1
Feb 2010: 108.3
Mar 2010: 112.5
Apr 2010: 102.3
May 2010: 111.4
Jun 2010: 116.1
Jul 2010: 120.2

This is my challenge.

If any academic economist, or even secondary school teacher, shows these figures to his class, asks each student/pupil to predict the full year increase in 2010 over 2009, using the monthly figures, and posts the results back here, I’ll be amazed if even the dimmest student/pupil in the class produces a more inaccurate forecast than the Central Bank.

Indeed, why don’t you have a go at yourself, Simpleton? Get your calculator out and have a stab at it. You’ll find that it is not rocket science, just simple arithmetic. I am 100 per cent confident that your forecast will be vastly more accurate than the Central Bank’s.


“If you bothered to check the facts, you’d find that I was the only one to forecast this time last year that GDP in Ireland would record positive growth in 2010.”

No praise like self off-the-point praise, I guess. You’ve been telling everyone since over a year ago that the economy is out of recession. Meanwhile, data show 9 successive quarterly declines in seasonally-adjusted GNP through 2010:Q2.

At some point, Ireland will be out of recession and you’ll be on here blowing your own trumpet about it. But then even a broken clock is right twice a day.

@Karl Whelan

It is over. GDP was 1% higher in 2010 Q2 than in 2009 Q4.

You are very quick to attack my forecasts.

You are very slow to attack those of the Central Bank and ESRI?

Even though mine have been far more accurate.

Are you afraid of being expelled from NUDE?

How is your campaign to force an election going?

I am still waiting for the base figures that you forecast on.

I predicted a slide from the then figure of 164 bn to about 162 bn. That figure was revised down to 160 bn. It would be easy for me to claim that saying GDP would be over 160 bn is growth, but forecasting from last year, anyone giving a figure for 2010 of less than 164 bn was forecasting decline.

Percentage changes are for spoofers. The absolute and base figures matter.

@ Hoganmahew

“Percentage changes are for spoofers. The absolute and base figures matter.”


I wrote to the Irish Times about this 2 years ago, when percentage changes were being bandied about like snuff at a wedding.

They’re still doing it though -indeed Madam Editor is impervious to reason. She’s too busy pretending to know what she’s talking about to worry about accepting new input.

Congratulations to JohnTheOptimist for his continuing efforts in drilling down into the economic data and providing some insights.

Maybe the CSO should have an associated Health Warning with its publications:
Consumption of these figures may be injurious to your health. Symptoms range from severe depression to extreme euphoria. Do not operate machinery for a period of 24 hours after consumption. Consumption should only be under the supervision of a skilled practitioner.
(JTO comes to mind.)

Ignoring caution and self-administering a dose, the figures for Industry are on the face of it impressive in that they are likely to recover to 2007 levels in 2010 (from 52 to ~50 billion euros) despite a fall in Building and Construction from 13.6 to ~6 billion euros.

The contributor John the Optimist adds a lot to the quality of the discussion on this site, in my opinion.
This is, not least, in respect of what appear to me to be legitimate points raised on this thread relating to the current 2010 GDP forecasts and the extent to which they incorporate correctly the most up-to-date trends in exports.
This issue ie whether we can return to acceptable levels of export driven growth, in turn is at the heart of the current domestic and international debate on our capacity to get out of our difficulties-so it is a very important issue.

Thank you for your comments, John Cash and Willie Slattery.

Just to make it clear, in case I haven’t before, I have no criticism at all of the CSO. The CSO is an excellent organisation. My criticisms are of the economists who are paid by taxpayers to analyse CSO statistics, but don’t do it properly. And, as a result, produce junk forecasts that are damaging the economy’s prospects for recovery.

The reaction of economists here to my complaints are appalling. I have drawn attention to the fact that recent Central Bank and ESRI forecasts have been abysmal, among the worst ever produced by comparable organisations. In particular, both organisations’ forecasts for GDP and exorts in 2010, the Central Bank’s for manufacturing output in 2010, and ESRI’s for net emigration in 2010. When I have raised the matter, the only response is to be accused of trolling, even though the two economists who accused me of that were not involved in the preparation of the forecasts, and I made no complaint against them. In the case of one of them, I merely him to pass on my comments to the economists in his organisation who were involved in their preparation.

It seems that, in Ireland in 2010, being critical of economists for their forecasts produces a reaction similar to what could have been expected for being derogatory about the Queen Mother in 1950s UK. Brian Lenihan was right. It is a ‘cosy cartel’. Time the axe was taken to it. The senior forecasters at the Central Bank and at ESRI should be hauled before a Dail committee and asked to explain why their forecasts are so inaccurate. Everyone else seems to be under a Dail committee spotlight. Why not them?

There are lots of reasons why forecasting is impossible and i suspect you know them all. One of the ways you have got lucky over the past year or so is your ability to exploit the inevitably bureacratic way official forecasts are produced.
Forecasting teams are, essentially, a committee. With all that goes with it. And they report to another committee, the one who approves the forecasts (or not) for publication. This produces all sorts of biases but also introduces long lags between finalisation of the forecast and publication. When economies are growing steadily, that doesn’t matter much. At turning points it matters a lot.

When a forecast is produced at a turning point, subsequent data, perhaps published within days of if the forecasts finalisation, can contain huge amounts of information. It can signal the turning point.

In steps smart arse commentators who see the economy has turned (the new data) who then FORECAST the economy has turned. JtO, you have had acess to important contemporaneous data that was not available to the official forecasters. Well done. Give yourself (another) huge pat on the back.

In economics, forecasting is a total backwater, for obvious reasons. It is done because there is huge demand for forecasts from people who should no better. But it is not done well because we don’t know how.

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