Ireland’s second quarter national accounts have just been released. Full details are here.
On a quarterly basis GDP was up 0.4% and GNP was down 0.4%. As Colm McCarthy is forever pointing out, our quarterly data are highly volatile and not too much should be read into a single set of figures. On an annual basis GDP was down by a little more than 1%, and GNP was essentially flat. Ireland is still bumping along the bottom. But, because of the mad way in which recessions are officially defined, the headlines this lunchtime are of Ireland “exiting recession”.
48 replies on “Quarterly national accounts”
All the headlines about Ireland exiting recession. Even with the volatile data, isn’t that statement wrong? Don’t you need 2 consecutive periods of sustained growth to be “officially” out of recession – not 1, coz Q4 2012 GDP to Q1 2013 fell.
There are only two important pieces of spin for this government:
1) Ireland is “out of recession”
2) Ireland has “exited the bailout”
This is what’s being used by them to say they have been a great success.
This is much easier than saying, “the economy has been fixed.” Which it won’t be.
Maybe Ireland exited the recession but is still somewhere in the depression.
Henny Sender had a super quote in the FT the other week
“executives have learnt that often there is no such thing as the intrinsic value of any security – it all depends on liquidity.”
So much for the risk free assets that form the basis of so much corporate finance.
I think we’ll be exiting this crisis for quite a while yet.
The Fed didn’t start tapering yet either
Better than a contraction and it’ll be spun as a triumph.
Does anyone know what rate of GDP growth we need just to keep our national debt stable and what rate of growth we need to begin to have some hope of paying it down?
the way i view it is, 2x negative = recession, 2x positive = recovery, and a reversal of either trend is “out of recession” or “out of recovery”.
It’s the biggest crisis since the 1930s and the normal classifications are not particularly helpful.
We need a new category – “May look like having left recession but in reality not fit to leave hospital yet”
The main contribution to quarterly seasonally adjusted GDP growth was from a rise in tax-related computer services exports.
There is a useful chart here from Goodbody on the contribution.
Just 4 firms account for over €30bn of the €36bn in annual intercompany accounting transactions that are treated as exports: Microsoft, Google, Oracle and Facebook. They employ about 5,500 people.
The GNP ex-headquarter firms is hard to decipher.
Some of you of older vintage may remember Antoin Murphy of the TCD Economics Department discovering the ‘black hole’ in the Irish balance of payments due to profit switching transfer pricing used by MNC’s. This was in the late 1980’s/early 1990’s (I think) and it was regarded as significant research and findings at the time. Dr Murphy achieved some measure of public fame at the time and he was regarded as an authority on this issue. Michael Hennigan has taken that ‘discovery’ to its logical conclusion and shown that a high percentage of the value of Irish exports originates from the accountancy practices of multinationals and bears no relationship to real economic activity or economic conditions in Ireland. For pointing this out Mr Hennigan is regarded as some sort of pariah.
To bring it down to a personal level, I have friends and relatives currently working in IBM Leixlip, Oracle in Fairview, SAP in Galway, and PayPal in Blanchardstown and – without exception – all of them are working in roles such as accounts, customer service, or admin which could just as easily be carried out in India. My friend in one of these companies works on intercompany European receivables account balances and in his section he is one of only four ‘native Irish’ among a team of twelve. The other eight have been recruited directly from abroad for their language skills and they are on contract with a well-known recruitment company in Dublin, i.e. they are not even on the payroll of the multinational and so are not entitled to sick pay, pension scheme, etc.
How many of you who read this site and the posts of Michael Henningan can honestly say that when they hear of another major jobs announcement in a multinational in Ireland do not wonder ‘How many of these jobs will go to foreign staff brought in for their language or software skills?’. Can anyone listen to headlines of a increase or decrease in exports and not wonder if it coincides with some major multinationals moving account balances? I know I can’t. It doesn’t mean Mr Hennigan is correct but the issue deserves a major research effort by the Irish economics profession.
That phenomena is well known and well discussed in and amongst economists. The issue is that it needs political action. And right now they are discussing constitutional cosmology.
It is more or less the same with the Leaving cert economics paper. An Bord Sloppy. And it’s very expensive to run a country thus.
A lot of the points you make could with equal force be made about the work force in the City of London!
Vincent Browne in fine form on the democratic deficit:
“This Government is even more cynical than the previous one.
Bring back Brian Cowen and Bertie!
It’s that bad.”
Blind Biddy is considering staying in Beirut!
The very idea of an “official definition” of a recession is absurd.
@ Peter Stapleton
“A lot of the points you make could with equal force be made about the work force in the City of London!”
So what is your point?
Just to add a few points…
It’s important to understand that in Antoin Murphy’s heyday, the issue was the price of imported goods following some processing in Ireland. Today, a few digital keystrokes can magic up billions in additional ‘exports.’
In recent times, not all the magic sales are debited out via intercompany charges (sales are a credit in the P&L), giving a net export in a period.
Last year computer services exports rose 15%; Microsoft’s turnover in 2011/2012 jumped 37% and it took the Irish Exporters’ Association crown as ‘Ireland’s top exporter’ from Google.
It may all sound grand but it sustains an air of reality that is a lot wider than the political arena.
Ministers and the Central Bank and sometimes the ESRI interpret a fantasy as reality and what is that: full-time jobs in foreign and Irish owned firms in the internationally tradeable sector in 2012 were 20,000 below the level in 2000 despite a 20% increase in the workforce. It’s likely that the majority of new jobs supported by the IDA are overseas hires. It’s a taboo issue.
Headline exports have almost doubled since 2000 but where are the jobs?
Ireland is also tops in Europe for innovation because of the virtual exports. Why then wonder on value for money from €24bn (inflation-adjusted) invested in the past decade?
When we believe our own propaganda that we have a high rate of business startups when it’s not true, why worry about putting better policies in place?
IDA Ireland issued a press release Thursday saying: “Taoiseach Enda Kenny today announced the opening of the Virtu Financial, LLC (“Virtu”), European HQ in Dublin and the creation of 30 highly skilled jobs for graduates in the fields of mathematics, computer science and other sciences (including those graduates holding Masters or Doctorate degrees)...Barry O’Leary, CEO IDA Ireland: ‘Virtu Financial is performing front office trading in its European Hub in Dublin. The company will be hiring very highly qualified talent to support its work here in Dublin.'”
That word ‘highly’ must surely mean that the R&D credit can be claimed for exotic Excel spreadsheets.
There is always a sense of excitement when ‘high quality’ or ‘high value’ jobs are announced.
My mother asked when free education was introduced: “Who will do the dirty jobs when everyone is educated?” That will be the day!
The key point here is the contrast with the shambolic training systems for the people down the economic pyramid and the inevitability of a bigger permanent underclass of unemployed.
ESRI research shows that the number of ‘highly skilled’ workers from outside the EEA (EU countries plus Iceland, Liechtenstein, and Norway) has been at a steady 30,000 from boom through bust – which is among the highest as a ratio of the workforce in the EU.
Despite the highlighting of ‘high quality’ jobs, administration jobs dominate in the IFSC and in several big high tech firms.
Less than one third of IDA Ireland client companies do minimal research (R&D).
Within the EU, many of the new IDA Ireland subsidised jobs are likely from overseas.
Total numbers of non-Irish citizens rose by 124,624 over or 30% in five years to April 2011 while Polish nationals increased by 93.7% since 2006 from 63,276 to 122,585 in 2011.
It may also be a positive day if someone like Enda Kenny got excited about real jobs in the domestic economy.
As usual thanks again for illuminating the ongoing extremely worrying underlying domestic trends which are being patched over by, I think the phrase the IRA used to use was, ‘spectaculars’.
There have been many ‘spectaculars’ of late but by now I believe most sensible adults take little heed of such job announcements presumably because in their heart of hearts they recognise that Govt spin is working overtime to keep the frot boiling to the top when the reality below the surface is domestic economic slaughter.
Vincent Browne last night took issue with RTE announcing, and his own employer TV3 for that matter, that the recession was infact over when the GNP growth number published by the CSO for Q2 was negative.
Its hard to understand why the need to tell the wider public one thing when in black and white the reporting body is saying the complete opposite. I fully understand the need for positivity but outright lies is unlikely to win the more sensible folks over. Perhaps the political spin doctors are right when they say that the public hears what is wants to hear. Its just too bad that in relation to this economic mire we find ourseleves that the announcements are becoming ever more spectacular and ever more outlandish – ‘Chemical Enda’ comes to mind.
More on the above…
Three employees generate 107m profit each. Wow. Must be the most profitable in the world.
“I fully understand the need for positivity but outright lies is unlikely to win the more sensible folks over.”
The positive headlines are for the plebs.
And the power of the mass media to alter the general mood of a nation is well understood by those in PR politics and marketing. Headlines are what count and they do have an impact. Believe it or not and despite all the well known satire warning against it most people do believe what they read.
The people who count know we are bumping along what we hope is the bottom. They know that the media has a job to do.
We know “the people who count” cannot actually count.
The banking crisis was foreseeable and was foreseen. A simple check would have proven that prudence was required. Simple is all that TPTB do in Ireland. Still, the Agenda is more important.
In defense of this government,at least they have been consistent. The one thing they can never be accused of,is telling the truth;
“How many of you who read this site and the posts of Michael Henningan can honestly say that when they hear of another major jobs announcement in a multinational in Ireland do not wonder ‘How many of these jobs will go to foreign staff brought in for their language or software skills?’”
Unless you are a xenophobe, I don’t understand why you should care whether these jobs are taken by Irish or foreign citizens. Foreign-born staff pay taxes and rent and spend their wages here just the same as Irish staff do. If there aren’t enough skilled Irish people to take these jobs then why on earth would you give one second thought to where they come from?
I’ll tell you what I think of when I hear another major jobs announcement – I think of Sean O’Sullivan’s guesstimate that every job in industry creates generates 5-6 in the local community (http://www.publicpolicy.ie/dragon-osullivan-identifies-irelands-critical-contraint/). Not sure I believe 5-6 but even if it’s half of that, it’s an awful lot of extra money filtering down to service and retail businesses that might have an impact on the live register.
Nominal GDP and real GDP are running well below that projected by the Department of Finance in April and as such imply that the debt ratio in particular will be higher than assumed even though the actual deficit may be around target. Yet the debate on the fiscal adjustment assumes the economy is performing as planned. Indeed the idea was that any fiscal adjustment would be a residual, required to hit a fiscal target,but of late the adjustment is becoming the target, which means the debt and deficit targets have to give.
“Arising from our approach, we have set some high-level goals for the five-year period, targeting the creation of 62,000 new jobs in foreign direct investment companies, both existing and new. The impact of this in the economy will be the creation of 105,000 jobs. Indecon has done some work for us that shows the multiplier effect is approximately 0.7 in respect of every new job created. We want to deliver half of all investments to the area outside Dublin and Cork, which have benefited most to date from foreign direct investment.”
@Edward V2.0 apols it’s a little out off date,if you have a more up to date link..
We just not going to discuss your assertion,this is an economics site right?
@ John Gallaher
Good point there!
The one cited above is from the US; Dell had a lot of local inputs but Google staff in Dublin, creating 5 jobs per employee is ridiculous.
Enda Kenny this morning announced 200 new jobs to be created in Dundalk over 5 years.
The US company has said in a recruitment promotion in Europe that its existing Irish-based 259 staff are from 30 countries using 16 working languages.
This issue is relevant to enterprise policy, public job subsidies and not racism.
The evidence is clear enough that the official expectation a decade ago that the FDI sector would put a greater focus on research has not been realised.
Microsoft and Apple have their strategic overseas R&D centres in Israel and Intel has more than three times its Irish payroll there.
It was interesting last week that Enda Kenny attended the official opening of what is called Google’s new innovation centre in Dublin. It is a conference centre.
Simply foreign firms in Ireland do not do research that merits patent filings and that’s possibly in part because the Irish seem too eager to do their bidding. They also do not see value in funding Irish university research – this is fact not opinion.
The other reality is that the FDI sector has peaked even though ‘trapped cash’ which may actually be in the US is counted as an FDI inflow from reinvested earnings data. The large existing base bulk up the data but in recent years most new projects are small.
Emerging market companies have a lot of choice in the world.
The CSO couldn’t tell me how many SMEs export and for how long. Central Bank economists estimated the ratio at 7%.
So with a failed innovation policy, a moribund agriculture sector and an SME sector that couldn’t sustain a first world standard of living, isn’t it time for a reality check?
Increasing competence in languages is important for both indigenous and foreign firms.
Wondering about distant markets such as in China is foolish except for companies with a proven experience in exporting. As for learning Mandarin, 400m Chinese need to do so.
This new economy isn’t great at creating jobs, even allowing for tax avoidance
Number of U.S. retail jobs Doritos Locos tacos created in the past year, according to Taco Bell : 15,000
Number of retail jobs created worldwide by Apple in that same period : 400
Thanks for that, I thought that 5 sounded high… but Indecon could be on the low side.
Since this is an economics site, here’s a link to an AER paper by Enrico Moretti from Berkeley, who appears to be the source of the 5x number – which is for ‘innovation jobs’ in the US, which have the highest multiplier. His work points to 1.6x for manufacturing and 2.5x for skilled labour in the tradable sectors.
He also looked at Sweden, which had a similar multiple to the US in skilled labour in the tradable sector.
There are plenty of jobs out there that require quantitative skills as well – it’s impossible to recruit good statisticians. Most students enter 3rd level afraid of anything mathematical and see university as a way of getting away from all that boring stuff. That’s why we end up recruiting Chinese PhD students and post-docs.
Getting rid of Irish and religion in schools would be a start.
@Edward v2.0,Hi Ed,eh thanks for the link to the yank multiplier…thought you were discussing Ireland whilst wearing your green jersey again….
@Elia you bring up a very important point,one that is drowned out by accusations of racism or xenophobia when mentioned….
Ed there is no “Irish” multiplier number,that was my point,ever wonder why?
I’m not sure I follow what you’re getting at. I presume that there is no firm Irish estimate out there because it is a pretty complex question and there hasn’t been a concerted effort to answer it. I don’t know whether the typical number in Ireland for a given jobs announcement would be 5x or 0.7x or 2.5x – but I am quite certain it is positive so any new jobs are a net positive, whether held be foreigners or not. In what way is this controversial to you?
@Ed,google is opening an envelope today,the whole cabinet is expected to attend….
There would be full page ads and banners if the number was close to what you “guessed” above.
Firstly, I didn’t guess anything – I made a reference to Sean O’Sullivan’s number and then followed up with the underpinning from a paper in The American Economic Review and referenced the US and Sweden, which are the only places I have found the analysis. I have already stated that I don’t know whether the number is 5 or the unsubstantiated 0.7 mentioned in the Dail so nobody is debating that point with you.
Secondly, instead of simply trying to sidestep logic and pick at my credibility, why don’t you simply answer the question I posed to you. In what way is it controversial to you that jobs filled in Ireland by foreigners are positive for the economy?
@Ed,I’ve tried to hit that link,it’s truly not working,may be a yank thing,can you please repost it?
The SOS one,thanks.
Again you made an assumption,or perhaps overheard it in a bar that “foreigners” spend the same as indigenous workers,no emigrants remittances,saving for a rainy day,relocating after contract expired ?
“Foreign-born staff pay taxes and rent and spend their wages here just the same as Irish staff do”
Says who…you ?
@Ed,I’m siting opposite a courthouse awaiting IRBC US BK case,it’s on at 2 local time.Apologies,enjoyed the exchange as always have jump,should be fun.
Will read your link and follow up,post anything interesting from the case on here,at the other tread,Good luck to the Irish,my money on the yank vulture funds just ask the Argentinians……
FYI – shifting the structural deficit goalposts!
Moretti is the guy who has done the US work, his papers are here
http://emlab.berkeley.edu/~moretti/papers.html and if you google him plus multiplier there are plenty of other articles. Not saying that the US analysis is a direct analogue to Ireland but it’s better than nothing.
Enjoy the show this afternoon and have a good weekend.
@Edward v2.0,thanks Ed have a great weekend too,oct 8 th next hearing.Judge irked no IRBC reps here,c’mon lads it’s not amateur hour any longer !
first upgrade in even the outlook of an Eurozone sovereign since 2009 i think (not counting post-default Greece). Its quite noteworthy.
The Real IBRC Story
* ” Our exposure is not to the building it’s to the money that comes from the leasing of it. If the value of the property goes down it doesn’t matter we still get our loan repaid” Fitzpatrick was nothing if not consistent in this,one of his core philosophies.
If you examine Sean Fitzpatrick’s core philosophy,if the property was was worth zero it didn’t matter, because he wasn’t lending against the properties,he was lending against the feudal leases.
Feudal Irish commercial property lease law i.e.upward-only rent reviews tied to long leases,say 25/35 years with no break clauses,were only available in Ireland.No other eurozone country,or any other country in the world allowed this ruinous lease law.
The only reason we had this feudal lease law was because the corrupt politicians organised state/sovereign leases for their bagmen paymasters–it was institutionalised political corruption. All Mr Haughey’s bagmen are sovereign landlords. The greatest bank and property crash in the history of mankind started with one house–Leinster house. Follow the Ansbacher men,follow the money,it always leads to Leinster house.
* Extract from “The Fitzpatrick Tapes”(Tom Lyons and Brian Carey)
Chapter 7 “Massacre” page 123
I bring you news of great joy:
“Senator Feargal Quinn, the founder of Superquinn, is set to introduce a bill to outlaw upward-only rent clauses in all leases,writes Aine Coffey.
His Upward Only Rent (Clauses and Review) Bill will come before the Seanad this week. If enacted,it will abolish upward-only rent clauses in leases predating February 28, 2010. These clauses have already been out-lawed by legislation after that date.
Quinn said he is confident his bill avoids potential constitutional problems by balancing the rights of different parties. He said the bill would offer a “lifeline” to struggling small businesses. It is “proportionate to the social and economic objective which it seeks to achieve”,the explanatory memorandum notes.
“Hopefully it will solve something that hasn’t been solved”said Quinn,who said he has been working for about a year on the bill with Brian Hunt,a lawyer. “I think there is a real need and I think we have found the solution. The wording is such that fairness has to operate”.
In 2011 the coalition abandoned a commitment in the Programme for Government to ban upward-only rent reviews. It threw in the towel,after a heated and divisive lobbying campaign, and on advice from the attorney general that changing the law would result in taxpayers having to pay landlords compensation.
Proposed legislation was considered vulnerable to constitutional challenge on a number of grounds,including retrospective interference with private contracts and infringement of property rights.
But good news non the less,similar to John’s….
“20 September 2013 – The NTMA notes Moody’s decision to change its outlook on Ireland’s sovereign rating to stable from negative. While the NTMA is pleased that the outlook on the rating has been changed it is disappointed that Moody’s did not see fit to upgrade the rating from its current Ba1 sub-investment grade rating to investment grade. ”
@JC that terrific news,I know which was you voting now…
@BEB-i may have misread your post,coffee had not kicked in ,you are correct outlook has improved,but still junk,some people may find this a bit much…
But hey,when you rely on the kindness of strangers to pay your bills,they get a lot of say in your budget!
“The credit ratings agency suggested that the Irish rating could be upgraded if fiscal consolidation targets continued to be fulfilled and growth gathered pace. A downgrade would be carried out if the fiscal consolidation process faltered. ”
@JC-i checked his web site to have a quick look at the proposal,looks like he’s presenting it tomorrow,good businessman,keen sense off timing !
The work goes on –the cause endures –the hope still lives —and the dream of fair rents will never die.
Dont allow Mr Haughey’s bagmen win this time.
“In what way is it controversial to you that jobs filled in Ireland by foreigners are positive for the economy?”
“Foreign-born staff pay taxes and rent and spend their wages here just the same as Irish staff do”
JG has given two short answers.
“no emigrants remittances,saving for a rainy day,relocating after contract expired ?”
“Indecon …multiplier effect is approximately 0.7 in respect of every new job created.”
The question is how much do we spend of our cash and common resources to produce those jobs. If our system is geared to attracting tax-management sections of global companies (as MH argues) to the scale that they can pass €321m through three employees (as FiatLuxor dug out regarding SAP), then the €14k per job that the IDA spends is laughable.
What we really offer them is a stable english-speaking, common-law system that has reputable courts and is well connected to the global financial system. It also has a sufficient base of professional firms ( though JG assessment “it’s not amateur hour any longer !” may be closer to the bone).
It may be my peasant mentality, but the tax driven FDI seems to be more a parasite industry than a productive one. To continue the analogy, every animal needs parasites, but a population that would be appropriate for a cow would irreparably stunt a small animal.
In any case if we are offering up our legislative, judicial and financial system then it is important to ensure that the jobs come from the population that maintains that system.
I have no problem with foreign born workers. I do have problems with a system that spends our common resources for industries that we do not have sufficient skilled people.
JC. Keep pushing.
This gives another angle on the tax/finance industry.