Irish economic update February 2019
The most recent Irish data show a continuing, albeit somewhat easing, economic expansion. Sentiment indicators remain mostly positive but show that the uncertainty surrounding Brexit weighs heavily on Irish businesses and consumers. Both manufacturing and services PMIs remain above 50, signalling an increase in activity, but they are their lowest levels since October 2016 and May 2013 respectively. Consumer sentiment rebounded slightly in January but the details suggest Irish consumers remain cautious as they try to make sense of the risk of the UK crashing out of the EU and the reality of continuing Irish economic growth (figure IE1).
Provisional figures for Irish manufacturing show a decrease in output of 0.5% for 2018 as a whole, but there is a silver lining in the form of the “traditional” sector, which is more reflective of domestic economic conditions. While December figures saw production in traditional firms grow by 1.7% yoy, this followed double-digit annual growth rates in November and October and translated to a 2.8% increase for 2018 as a whole.
Retail sales data for December show that the volume of sales increased by 3.7% yoy, or 5.1% yoy excluding car sales. These figures take into account pre-Christmas sales such as Black Friday and Cyber Monday and as such, December posted one of the strongest annual growth rates for retail sales volumes excluding cars in 2018. Retail sales volumes for 2018 as a whole grew by 3.9% yoy, or 3.8% yoy excluding cars, which is in line with our overall forecast for consumer spending in 2018 of 3.0%.
The Irish unemployment rate stayed steady in January at 5.3%, but is
still well below the rate of 6.0% seen in January of last year. As the
Irish labour market continues towards full employment and the
uncertainty around Brexit intensifies, we think a moderation in the
pace of improvement in the unemployment rate is likely. As such, we
think the average unemployment rate for 2019 will be 5.0%.
Exchequer returns for end-January show that total tax revenue grew by 7.0% yoy to EUR 5,370 million, due largely to a strong performance in VAT (11.7% yoy to EUR 2,730 million) and income tax (+7.6% yoy to EUR 1,883 million), that would seem consistent with healthy domestic conditions over the turn of the year. Corporation tax receipts were down year-on-year by EUR 127 million to EUR 102 million, but this is largely due to repayments as well as the fact that January is not a significant month for this tax-head. Overall, these results signal a positive start to 2019.