New Central Bank Quarterly Bulletin Published

The Central Bank published the Quarterly Bulletin (QB 2 – April 2018) today. The economy continues to perform well with the growth outlook revised upwards by close to half a percentage point to 4.5 per cent on average in 2018/19 (relative to the last set of forecasts in January). This outlook is underpinned by robust domestic demand, solid prospects for the labour market and a supportive international environment. At the same time however, a number of significant tail risks remain. These predominantly relate to the vulnerability of the economy to external shocks, namely Brexit related exposures, any increase in protectionist trade policies, changes to international tax regimes (that could affect FDI decisions) and disruptive exchange rate movements.

Some of the forecast highlights within the Bulletin include:

  • labour market – we now see the unemployment rate falling below 5 per cent to average 4.8 per cent in 2019, with close to 99,000 additional jobs being created this year and next. Annual employment growth is expected to average 2.2 per cent in 2018 and 2019, moderating from growth rates of close to 3 per cent in recent years
  • domestic spending – underlying domestic demand (which attempts to strip out much of the noise in some of the components of investment) is forecast to grow by 4.3 per cent per annum in both 2018 and 2019
  • trade – net exports are expected to support growth over the forecast horizon.
  • inflation – consumer prices were subdued last year but we expect some pick-up towards closer to 1 per cent in 2018 and 2019, as the effects of past sterling weakness unwind coupled with strong domestic demand.

Aside from the normal commentary and forecasts for the economy, the Bulletin contains Boxes on:

  • International economic outlook (Box A – page 11)
  • Sterling depreciation (Box B – page 14)
  • Leading indicators of new housing output (Box C – page 17)
  • Vacancies and wage growth (Box D – page 22).

On the financing side of the economy, there are pieces on:

  • Trends in Bank Lending to SMEs (Box A – page 35)
  • Exposures of Irish-Resident Investors to Offshore Financial Centres (Box B – page 40).

Signed Articles

The Bulletin includes two signed articles by Donnery, Fitzpatrick, Greaney, McCann and O’Keeffe (2018), on “Resolving Non-Performing Loans in Ireland 2010-2018” and one by Conefrey and McIndoe-Calder (2018) on “Where are Ireland’s Construction Workers?”

6 replies on “New Central Bank Quarterly Bulletin Published”

The central bank has raised its growth forecast for 2018 to 4.8% from 4.4% but it is interesting that, like most other forecasters, it is ignoring the carryover effects from last year. Specifically, annual growth in q4 was 8.4% or 7.8% using the seasonally adjusted data, and the latter implies annual growth of 5.3% in 2018 with no change in quarterly GDP. 1% growth in each quarter would give an annual 2018 growth figure of 8%. There was a similar issue in 2017 and the consensus at the time also implied a fall in GDP through the year, which proved wildly wrong. Growth of 9% was commonplace in the latter part of the 1990’s. The reluctance to follow a conventional carry over approach is perhaps understandable given that past Irish data is often heavily revised, including quarterly GDP, with the export figures highly volatile and impossible to forecast.

Dan I posted an almost identical comment here on April 11th last year. Forecasts from the ESRI, CB and DoF all implied, due to carry-over, a flat performance in 2017, which did not happen. Might happen this time – who knows?

It’s amazing when reading this bulletin to observe the extent to which the performance, and any measures of the performance, of the Irish economy are distorted by the activities and the antics of the MNC enclave. For example, we have to develop our own macro metrics because the universally applied GDP metric is so distorted and Frank Barry has recently lamented the distortion of competitiveness indicators. But measurement is probably the least of the problems. And it does, of course, provide some useful distraction so as to avoid confronting the more serious underlying problems.

What is equally amazing, but totally unsurprising, is the extent to which those who exercise power and influence, and the armies of well-heeled flunkies and functionaries they retain, maintain in part both a symbiotic and a parasitical relationship with the MNC enclave. But the principal parasitical relationship is with the multitudes in the lower income percentiles. This, of course, following the blow-outs of 2008, is the restored “new normal”.

Even if it didn’t have a significant MNC enclave, Ireland would probaby be well capable of generating, among all OECD members, the most unequal market outcomes. But the activities and antics of the MNC enclave exacerbate these unequal outcomes and help to diffuse them throughout the economy. And this encourages voracious rent-seeking by those capable of exercising political and economic power in the sheltered sectors.

Euro Area membership and the legacy of serious policy failings have shrunk monetary and fiscal policy to the extent that the principal focus is on relatively small adjustments to the huge and largely fiscal redistribution required to ameliorate the impact of the excessively unequal market outcomes – and to ensure that the parasites have enough to feed on when they bite in to those in the lower income percentiles.

Of course tax receipts generated by the activities and antics of the MNC enclave provide a significant contribution to the funding of this great redistribution. But they are inherently volatile and there is a strong case for assuming a relatively small portion is sustainable and applying the residual to a cyclical adjustment and external shock management fund and to a genuine sovereign wealth fund – as opposed to the ISIF. This, of course, would require significant reductions in rent-seeking and increases in the efficiency of the great redistribution. But there isn’t a snowball’s chance in hell of this happening. So roll on the next crisis and those in the lower income percentiles will be hosed again.

Sorry for the digression. Didn’t get a chance to comment on the last comment by the great ‘John the Optimist’. I for one always enjoyed your contributions. I wish you all the best and a speedy recovery.

[That`s Legal!? – thanks for reminding me. I noticed JtO’s post but when I went to reply I got the “Comments Closed” notice.]

John, if you are still reading – my best wishes for your health. Hope to ‘see’ you back here.


It seems extraordinary that our CSO and CB still insist on publishing economic forecasts based on what are generally understood to be unreliable numerical estimates. Either the author forecasters are engaging in ‘motivated gullability’ (attempting to bullsh*t us) or are simply displaying a heroic level of doctrinal passion. Either way, its a deplorable situation.

Presumably the estimates are published for political consumption rather than to inform the general public in a true and fair manner. And if this is correct, then why not just send the politicians a personal copy – with a prominently displayed ‘caveate lector’ disclaimed.

I would not have thought it possible for teams of professionally trained persons to mis-ananlyse, mangle and massage numerical data in such an incompetent manner. But they do! And what of those economic commentators of the Fourth Estate? Are they numerically and mathematically challenged also? Based on what I read in MSM things do look a bit iffy in that direction.

A scientist would never attempt to conflate velocity with acceleration. Because if they did they would be judged as incompetent by their peers. So why do many economists (and economic commentators) continue to conflate changes in the money supply (Inflation) with changes in the prices of goods and services? Incompetence or laziness?

There must be some Irish-based economist or economic commentator, who has regular access to MSM, who could pen the appropriate article and set this matter to rights. Since 2010 (or so) trillions of currency units have been issued by governments and CBs in US, UK and EZ. And what is the outcome? There has been a massive increase in the values of virtual assets – but almost no increase in wages and salaries; hence, virtually no statistically significant increases in the prices of goods and services – until now. So why this disparity? Massive Inflation, but no inflation? Anyone care to explain this.

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