Irish Economy - update

The Irish economic growth remains on a strong path. Retail sales data for August show that the volume of total retail sales grew by 2.6% yoy, the slowest annual growth rate since March. However excluding car sales, retail sales grew by a much stronger 4.0% yoy. Manufacturing production rose by 13.4% yoy in August, following an annual decrease in July of 5.2%. Both the “modern” sector, which includes pharmaceutical and tech companies, and the “traditional” sector, which is more reflective of the domestic Irish economy, posted double digit growth rates of 18.8% yoy and 11.2% yoy respectively. PMI survey data on the manufacturing sector, which is markedly less volatile, continue to signal rising activity despite manufacturing PMI falling slightly to 56.3 in September from 57.5 in August (figures over 50 signal expansion). Similarly, services PMIs increased to 58.7 from 58.0.

Irish residential property price inflation edged lower in August for a fourth successive month. Property prices were 8.6% higher in August 2018 than a year earlier compared to an increase of 10% in July. While positive momentum persists, the most recent months’ data suggest that a trend of easing property price inflation seems to be emerging. This is likely due to affordability constraints as well as an increase in supply.

Perhaps the most important development in the last month was the announcement of the Irish Government’s Budget for 2019. Budget 2019 envisages a position of broad balance in the public finances in both 2018 and 2019 and, thereafter, predicts a steady further improvement to the point where on the Department of Finance’s figures a significant surplus of 1.4% of GDP is achieved by 2023 (2.4% of GNI* on our estimates in figure 4), implying a return towards the scale of surplus seen in the pre-crisis years. As the near-term outlook for the public finances is favourable, extra money will be injected into areas with a notable domestic footprint such as health and housing. Moreover, as costs are not being broadly increased, Budget 2019 could be said to offer some protection against a hard Brexit although it would be impossible to fully insulate the Irish economy against such a development.

Figure - Irish Budget 2019 envisages steady improvement of the budget balance

Source: KBC Economic Research based on Eurostat, CSO (2018)

Latest publications on Ireland

Hard Brexit worries hit Irish business confidence

IE20181025 Hard Brexit worries hit Irish business confidence

Budget 2019: post-crisis or pre-crisis?

IE20181010 Update on the Irish Economy

The Budget and You: Helping, Hurting or Hardly Noticing?

IE20181009 The Budget and You: Helping, Hurting or Hardly Noticing?

Economic forecasts for Ireland in numbers