Anyone else find it, er, jarring that the economy is apparently growing by 7% per annum at the same time that the government is passing “Financial Emergency Measures”?
How much of this so-called growth is government driven? NAMA giving developers money to build houses ( I know of 4 estates in my local area) or Irish water putting in wasteful meters because I have the pleasure of living on main street and do not know where the spending is coming from. When you see retailers heavily discounting in the run up to Christmas you know that these type of growth figure are pie in the sky and not been driven by the people on the street. While the government gear up for an election based on these figures things out in the real world do not look so good, commodity prices for example. The truth will come out but only after the wool has been pulled over people’s eyes with the help of ‘independent’ organisations like the CSO and RTE
We should all party.
The good news continues but the overall picture is a little opaque.
Prof Patrick Honohan, the then governor of the Central Bank, in a letter to Michael Noonan, finance minister, last August on Budget 2016 warned:
The interpretation of both GDP and GNP statistics as measures of economic performance is seriously complicated by the way in which the activities of multinational corporations are measured, and a significant part of the recent growth in these production numbers can be attributed to these distorting features.
Exports are up 41% since 2007 but my calculations show that exporting jobs are down about 30,000 since mid-2008 suggesting that most of the jobs added since end 2012 are in the domestic sector.
MNC R&D is up €5.3bn in real terms on the year (over 200%). This is virtual not real and is almost double total R&D spending in the economy in 2013. In effect government’s 2020 target for R&D spending published this week, has already been met:
That must bring debt to GDP below 100%. Not bad. My guess is balanced budget by next year. And that’s an economy without a construction sector.
Let corporation tax receipts continue to rise to meet us and may the QE winds always be at our backs.
Yesterday I spoke to a butcher who said people were ordering bigger turkeys and in Marks n Spencer there were deep discounts on food. The overall global picture remains fragile.
There was a time when Ireland was in a boom while the rest of the EZ was rather in the doldrums – and there was a one-size-fits-all monetary policy.
Limited inflation yet (although its there in some localized labour markets in Irl) but its interesting that expectations are that its only a matter of time before the ECB eases further.
A host of economic indicators suggest the economy is growing very strongly, including tax receipts, the labour market and retail sales but there is an increasing Black box element around the GDP release which means it is difficult to predict in the short term. For example, merchandise exports, published monthly, amounted to €26bn in q3, up an annual 11%, whereas total exports in the national accounts came in at €66bn, up over 20%, including €36bn merchandise exports. Total imports grew at an even faster pace, 22%, to €54bn, against a published merchandise import figure of less than €15bn. These are big numbers with no indication, other than the trend, of what they might be in a given quarter.
Similarly, as @MH points out, intangibles such as R&D and patents, are extraordinarily strong and now account for around half of total spending on non-construction investment and again we have no idea what is happening there.
Another issue is that multinationals often price in US dollars which given the latter’s appreciation this year results in reported higher prices in euros- Irish export prices are up 7% yoy in q3, so the nominal GDP deflator is set to rise by around 5% despite virtually no price rises in domestic demand.
On a headline basis real GDP is now over 7% above the previous peak and up 20% from the cycle low. Average growth for the year is likely to be at least 7% which would be the strongest since the millennium, with GNP around 5% or lower as profit outflows have picked up after a soft period.
The MNC sector is thriving but there’s a shocking homelessness problem. Who shall be happy ?
A pedantic comment. GNP fell 0.8%. They say “Growth in GNP decreased by 0.8 per cent in this quarter.” This is not the first time they have said something like this. Could someone please explain to them how the distinction between levels and growth rates translates into plain English?
Good economic data but same old pessimism from same old flat earth brigade on site.
@Tull
With GDP growth on a phallic scale, can you let us know when the serious dysfunctions in the economy and society will be dealt with.
Mandatory employer and employee funded pensions schemes, for the 50% of private sector workers that have no pensions, would be a start.
Affordable housing located somewhere adjacent to the workplace would be another important issue, and I am sure there are many other issues.
Watching GDP rise from a distance, is of little satisfaction to the hundreds of thousands who contribute to that rise, but benefit little from it, or see whatever benefit there is immediately pocketed by greedy, state and bank protected landlords.
In summary, if the numbers are real and are to mean something to the average Joe, lets see the benefits on the table.
@Tull
7 per cent growth not good enough because homeless and can’t understand and multinational and someone bought a big turkey.
How is Irish productivity doing?
Over the last few years, corporation Tax has been running at about 11% of Direct Investment out flows as per Balance of payments. ( a figure Finance and Revenue confirm at every possible opportunity). This year it looks like it will be running at about €7.2B on outflows of €48-€50B. Based on the same ratio as in previous years the figure should be about €65B. Are BoP/National Accounts going to come up with some major revisions to total GDP? Or am I wrong?
@ KO’R: ” Could someone please explain to them how the distinction between levels and growth rates translates into plain English?”
I’v been trying … not successfully it seems.
Level: a static characteristic – like the horizon. No difficuty in understanding this.
Rate: a kinetic characteristic – like a competitor descending a ski-jump (goes faster and faster). Constructing a meaningful understanding of this concept is very difficult.
Physicists have the greatest difficulty in getting novices to comprehend the difference between velocity (a level) and acceleration (a rate). Now about economists … … nuff said!
As a scientist I cannot believe the convoluted opaqueness of some of the quantitative variables being used as measures of economic activity. Have they no error ranges? Are they even reliable as quantitative estimates? Seems to me that they are just meaningless means. Maybe they should come with a “Consume sensibly” warning.
“Irish productivity”. Seems great: my local AIB has replaced several humans with blinking and beeping robots.
JF
number of rough sleepers going down as well by 46% to 91
number of a/c in mortgage arrears going down -now just over 60% of peak
employment going up
tax receipts going up
budget deficit disappearing like snow off a ditch
Pesky facts
@ Till
Has “if I have money I spend it” been sedated? One of the challenges of encouraging numbers is expectation management. Especially under clentelist systems. The IMF got nowhere near the DNA of the Deep State whick produced leaders such as Mr Cardiff.
Surely Ireland’s social and economic problems have a better chance of being resolved or at least tackled effectively in an economy that is growing strongly? Yet out President ‘recoils’ from good news about growth. Not sure Obama would or the people getting jobs or seeing their real pay rising strongly.
@Eanna. I’m not sure about your data . Equity outflows earned on Direct investment amounted to €32bn last year , slightly down on 2013. That fall contributed to a stronger rise in GNP than GDP (6.9% versus 5.2%). As you suggest, outflows have picked up strongly ytd, amounting to €32bn, so the full year figure will be considerably higher than in 2014. GNP growth will be much lower than the 7% likely in GDP. It averaged 5.8% over the first three quarters and will probably be below 5% this year and below 3.5% if we get a similar outflow in q4 as in q3..
This is cheeky. Why should they be more concerned about an electronic euro than a paper one?
Dan,
Our president has been a sociologist, a poet a senator & latterly a TD. For that part of his adult life that he can remember he has been somewhat dependent on the generosity of the taxpayer and disconnected from the market economy.
Would have made a fine scrum half though.
As Donald Trump knows, people absorb what they want to hear or read while nuance is often missed in the communications of folk who’re not carnival barkers.
Of course during the bubble and maybe now some people were or are over-pessimistic.
However, using the immortal Dante’s classification of sins, who were more culpable in the significant human misery caused by the bust? Doomsayers or ignorant cheerleaders?
@ Dan McLaughlin
It’s not news when the president says the recovery is going great etc. Check out his actual speeches and you will see that his comments are more balanced than perceived.
@ DOCM
Italy
The prime minister this year raised the amount of tax that can be evaded without any criminal sanctions from €50,000 to €150,000.
Jaysus 🙄
I note tull’s view that all those working in the public service are not, in fact, working but are nothing but parasites…
Ernie,
No. Lecturers in social science & some senators.
Many who got rich off QE are parasites. Markets used to decide things like pricing based on fundamental value. They didnt need to suck off the teat of Central Banking.
27 replies on “Updates from the CSO”
Anyone else find it, er, jarring that the economy is apparently growing by 7% per annum at the same time that the government is passing “Financial Emergency Measures”?
How much of this so-called growth is government driven? NAMA giving developers money to build houses ( I know of 4 estates in my local area) or Irish water putting in wasteful meters because I have the pleasure of living on main street and do not know where the spending is coming from. When you see retailers heavily discounting in the run up to Christmas you know that these type of growth figure are pie in the sky and not been driven by the people on the street. While the government gear up for an election based on these figures things out in the real world do not look so good, commodity prices for example. The truth will come out but only after the wool has been pulled over people’s eyes with the help of ‘independent’ organisations like the CSO and RTE
We should all party.
The good news continues but the overall picture is a little opaque.
Prof Patrick Honohan, the then governor of the Central Bank, in a letter to Michael Noonan, finance minister, last August on Budget 2016 warned:
Exports are up 41% since 2007 but my calculations show that exporting jobs are down about 30,000 since mid-2008 suggesting that most of the jobs added since end 2012 are in the domestic sector.
MNC R&D is up €5.3bn in real terms on the year (over 200%). This is virtual not real and is almost double total R&D spending in the economy in 2013. In effect government’s 2020 target for R&D spending published this week, has already been met:
Irish Innovation 2020 Strategy Report: Wish list based on distorted data
If Pfizer becomes Irish in the next 12 months, less than 10 American companies with over 700,000 employed will distort the national accounts.
It’s about time for the CSO to provide clarity on distortions when accounts are published.
Dermot O’Leary of Goodbody has noted that core domestic demand (excluding planes and R&D) has slowed.
More here:
Irish GDP and GNP grow 7% and 5.6% in 9 months to Sept 2015
That must bring debt to GDP below 100%. Not bad. My guess is balanced budget by next year. And that’s an economy without a construction sector.
Let corporation tax receipts continue to rise to meet us and may the QE winds always be at our backs.
Yesterday I spoke to a butcher who said people were ordering bigger turkeys and in Marks n Spencer there were deep discounts on food. The overall global picture remains fragile.
There was a time when Ireland was in a boom while the rest of the EZ was rather in the doldrums – and there was a one-size-fits-all monetary policy.
Limited inflation yet (although its there in some localized labour markets in Irl) but its interesting that expectations are that its only a matter of time before the ECB eases further.
A host of economic indicators suggest the economy is growing very strongly, including tax receipts, the labour market and retail sales but there is an increasing Black box element around the GDP release which means it is difficult to predict in the short term. For example, merchandise exports, published monthly, amounted to €26bn in q3, up an annual 11%, whereas total exports in the national accounts came in at €66bn, up over 20%, including €36bn merchandise exports. Total imports grew at an even faster pace, 22%, to €54bn, against a published merchandise import figure of less than €15bn. These are big numbers with no indication, other than the trend, of what they might be in a given quarter.
Similarly, as @MH points out, intangibles such as R&D and patents, are extraordinarily strong and now account for around half of total spending on non-construction investment and again we have no idea what is happening there.
Another issue is that multinationals often price in US dollars which given the latter’s appreciation this year results in reported higher prices in euros- Irish export prices are up 7% yoy in q3, so the nominal GDP deflator is set to rise by around 5% despite virtually no price rises in domestic demand.
On a headline basis real GDP is now over 7% above the previous peak and up 20% from the cycle low. Average growth for the year is likely to be at least 7% which would be the strongest since the millennium, with GNP around 5% or lower as profit outflows have picked up after a soft period.
The MNC sector is thriving but there’s a shocking homelessness problem. Who shall be happy ?
A pedantic comment. GNP fell 0.8%. They say “Growth in GNP decreased by 0.8 per cent in this quarter.” This is not the first time they have said something like this. Could someone please explain to them how the distinction between levels and growth rates translates into plain English?
Good economic data but same old pessimism from same old flat earth brigade on site.
@Tull
With GDP growth on a phallic scale, can you let us know when the serious dysfunctions in the economy and society will be dealt with.
Mandatory employer and employee funded pensions schemes, for the 50% of private sector workers that have no pensions, would be a start.
Affordable housing located somewhere adjacent to the workplace would be another important issue, and I am sure there are many other issues.
Watching GDP rise from a distance, is of little satisfaction to the hundreds of thousands who contribute to that rise, but benefit little from it, or see whatever benefit there is immediately pocketed by greedy, state and bank protected landlords.
In summary, if the numbers are real and are to mean something to the average Joe, lets see the benefits on the table.
@Tull
7 per cent growth not good enough because homeless and can’t understand and multinational and someone bought a big turkey.
How is Irish productivity doing?
Over the last few years, corporation Tax has been running at about 11% of Direct Investment out flows as per Balance of payments. ( a figure Finance and Revenue confirm at every possible opportunity). This year it looks like it will be running at about €7.2B on outflows of €48-€50B. Based on the same ratio as in previous years the figure should be about €65B. Are BoP/National Accounts going to come up with some major revisions to total GDP? Or am I wrong?
@ KO’R: ” Could someone please explain to them how the distinction between levels and growth rates translates into plain English?”
I’v been trying … not successfully it seems.
Level: a static characteristic – like the horizon. No difficuty in understanding this.
Rate: a kinetic characteristic – like a competitor descending a ski-jump (goes faster and faster). Constructing a meaningful understanding of this concept is very difficult.
Physicists have the greatest difficulty in getting novices to comprehend the difference between velocity (a level) and acceleration (a rate). Now about economists … … nuff said!
As a scientist I cannot believe the convoluted opaqueness of some of the quantitative variables being used as measures of economic activity. Have they no error ranges? Are they even reliable as quantitative estimates? Seems to me that they are just meaningless means. Maybe they should come with a “Consume sensibly” warning.
“Irish productivity”. Seems great: my local AIB has replaced several humans with blinking and beeping robots.
JF
number of rough sleepers going down as well by 46% to 91
number of a/c in mortgage arrears going down -now just over 60% of peak
employment going up
tax receipts going up
budget deficit disappearing like snow off a ditch
Pesky facts
@ Till
Has “if I have money I spend it” been sedated? One of the challenges of encouraging numbers is expectation management. Especially under clentelist systems. The IMF got nowhere near the DNA of the Deep State whick produced leaders such as Mr Cardiff.
Surely Ireland’s social and economic problems have a better chance of being resolved or at least tackled effectively in an economy that is growing strongly? Yet out President ‘recoils’ from good news about growth. Not sure Obama would or the people getting jobs or seeing their real pay rising strongly.
@Eanna. I’m not sure about your data . Equity outflows earned on Direct investment amounted to €32bn last year , slightly down on 2013. That fall contributed to a stronger rise in GNP than GDP (6.9% versus 5.2%). As you suggest, outflows have picked up strongly ytd, amounting to €32bn, so the full year figure will be considerably higher than in 2014. GNP growth will be much lower than the 7% likely in GDP. It averaged 5.8% over the first three quarters and will probably be below 5% this year and below 3.5% if we get a similar outflow in q4 as in q3..
This is cheeky. Why should they be more concerned about an electronic euro than a paper one?
http://www.rte.ie/news/business/2015/1211/752928-ecb-calls-on-government-to-rethink-atm-charge/
One possible explanation might be the continued love affair with cash in at least two of the largest EA economies; Italy, and Germany!
http://www.ft.com/intl/cms/s/0/45082380-9f33-11e5-8613-08e211ea5317.html#axzz3u38UFWId
The official German view; divided!
https://www.deutschland.de/en/topic/business/the-abolition-of-cash
Dan,
Our president has been a sociologist, a poet a senator & latterly a TD. For that part of his adult life that he can remember he has been somewhat dependent on the generosity of the taxpayer and disconnected from the market economy.
Would have made a fine scrum half though.
As Donald Trump knows, people absorb what they want to hear or read while nuance is often missed in the communications of folk who’re not carnival barkers.
Of course during the bubble and maybe now some people were or are over-pessimistic.
However, using the immortal Dante’s classification of sins, who were more culpable in the significant human misery caused by the bust? Doomsayers or ignorant cheerleaders?
@ Dan McLaughlin
It’s not news when the president says the recovery is going great etc. Check out his actual speeches and you will see that his comments are more balanced than perceived.
@ DOCM
Italy
Jaysus 🙄
I note tull’s view that all those working in the public service are not, in fact, working but are nothing but parasites…
Ernie,
No. Lecturers in social science & some senators.
Many who got rich off QE are parasites. Markets used to decide things like pricing based on fundamental value. They didnt need to suck off the teat of Central Banking.