Two pieces of moderately good economic news. The Live Register declined by 6,600 on a seasonally adjusted basis in October and the standardised unemployment rate fell by a tenth of a percent to 13.6%. Also the October exchequer returns show that tax receipts, which had been falling behind target for a while earlier this year, are now slightly above target. Overall, the non-banking component of the deficit for 2010 appears set to not be too far off the target set last December.
For an economy that’s supposedly in recovery, the unemployment figures seem to be puzzlingly weak. The July Live Register figures show an increase in the standardised unemployment rate from 13.4% in June to 13.7% in July. Slightly less negative were the July exchequer figures: Tax revenues had fallen from being on target in April to 1.6% behind target in June. The July figures reversed that trend to be only 1.4% behind target.
Still, both sets of figures raise a question. We keep hearing about how GDP figures are supposed to be coming in better than the assumptions penciled into the last budget: How is that to be reconciled with tax revenues being behind budget target and the unemployment rate coming in higher? (The budget assumed a year average unemployment rate of 13.2%, which is the average for the year so far with the figure now moving in the wrong direction.)
Update: I was interested to hear Minister Eamon O’Cuiv explain the increase in the seasonally adjusted unemployment rate on seasonal factors. Sure unemployment always goes up in July, I heard him say on the radio. You’d think the CSO boffins would have factored that in to their calculations …
The exchequer returns for May are in. Here‘s a (new?) webpage with all the Exchequer statements for the year. I’ve heard the report described as good news because it means revenues are only 1.2% below target. That said, these revenues are 10.4% down on the same time last year. Also, revenues were only 0.1% below target at the end of April. Let’s hope we don’t have too many more months of this kind of good news.
I wonder, however, whether evidence of sticking with our plan is quite enough right now to convince skeptical international markets that we can stabilise our fiscal situation. The yield on ten-year Irish government bonds moved out to almost 5.6% today, with the spread over Bunds reaching a new high of 2.7 percentage points. I think the next few weeks would be a good time to start to provide more clarity about the likely composition of this year’s budget, with indications about whether a property tax is likely, about the nature of the “universal social contribution” as well as the nature of further spending cuts.
Here‘s a link to the exchequer returns for February and here‘s the release comparing tax outcomes to the targets set out in the budget. (Here are the full set of targets for the year.) Tax revenues are 1.3% behind target for the year.
If replicated over the year, that would imply a shortfall for the year of €310 million which isn’t such a big deal. That said—and I don’t claim to be an expert on the month-to-month stuff and I know lots of this stuff is really noisy—income tax receipts being down 6% relative to target seem like bad news, More generally, I’m starting to get worried at how we keep falling short of targets.
The GDP and unemployment statistics from last year showed the really steep declines in activity ended in the second quarter. I’m looking for an unwinding of the huge year-over-year declines by April or so. If that doesn’t happen, we could end up pretty far off target.