Today, the Bank published its first Quarterly Bulletin (QB 1 – January 2018) of the year, including forecasts to 2019. The outlook remains robust with GDP forecast to grow by 4.4 and 3.9 per cent in 2018 and 2019, respectively. This forecast is underpinned by strong domestic demand and broad based employment gains.
Some of the highlights include:
- the increasing prospect of full employment – we see the unemployment rate falling towards 5 per cent by next year with an additional 89,000 persons in employment.
- the composition of employment is likely to differ markedly relative to the previous employment peak (in 2007). Back then, 1 in 9 persons were directly employed in construction relative to 1 in 16 expected in 2019.
- Inflationary pressures remaining subdued but picking up from 0.7 per cent this year to 0.9 per cent in 2019. This partly reflects an unwinding of the negative impact on goods prices from recent euro/sterling exchange rate movements. (For more on exchange rate pass through, see Reddan and Rice (2017)).
- The main risks relate to Brexit, the global trade and taxation environment as well as domestic overheating.
As regards the latter, a key question at present is the extent of remaining slack within the economy and prospects for wages and employment. Recent research within the Bank (Linehan et al., (2017) and Byrne and Conefrey (2017)) have addressed some of these issues. Further, the newly published labour market data (documented in the Bulletin) indicate that broader measures of labour supply signal that that there is still additional labour supply available. All of this suggests that while labour market conditions are tightening, there is still scope for unemployment to fall further before more significant wage pressures emerge.
In terms of the Irish economy, the Bulletin contains short Boxes on:
- international economic outlook (Box A – page 12)
- the recovery in personal consumption expenditure (Box B – page 15)
- trade deflators dynamics (Box C – page 21)
- the new labour force survey (Box D – page 24).
On the financing side of the economy, there are short pieces on:
- household debt and disposable income (Box A – page 38)
- the statistical treatment of new bank holding company structures (Box B – page 44 )
- holders of Irish resident investment funds shares across the Euro Area (Box C – page 46).
Finally, the Bulletin also includes a signed article by Kelly and Osborne-Kinch (2018) looking at new quarterly statistics on insurance corporations.