Quarterly Bulletin No.3 2019

Read the Forecast Summary Table.

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Read the full Comment for Quarterly Bulletin No.3 2019.

Léigh tráchtaireacht ar an Timpeallacht Gheilleagrach.

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Following a strong performance last year, the outlook for the economy remains positive but subject to heightened levels of risk and uncertainty. Reflecting both the slowdown in global economic activity and emerging capacity constraints in the domestic economy, our central projection continues to point to a slowdown in growth compared to the robust performance of recent years. However, taking account of the upward revision to both the level and the pace of growth in the economy last year and the evident resilience of both domestic demand and export growth in the first half of the year, we have revised upwards our forecasts for growth for 2019 and 2020.

Read this chapter in full: Irish Economy.

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The Overview of Financial Developments Chapter presents a summary of the latest financial trends in Ireland. The Financial Statistics Summary Table and accompanying graphs provide key insights for understanding important trends, utilising the latest data for the household sector, small and medium sized enterprises, the financial sector and the public finances. Links to the relevant source data are provided below each chart.

Read the chapter: Overview of Financial developments in the Irish Economy.

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The Irish economy has recovered at an impressive pace from the economic and financial crisis that began in 2008. In the absence of adverse shocks such as a disorderly Brexit, continued strong growth and further declines in the unemployment rate could result in the emergence of overheating pressures.

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The improvement in the Irish labour market since late 2012 has been remarkable. Unemployment has fallen towards 5 per cent, while the number of persons employed in the state has now surpassed it pre-crisis peak.

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During the second half of 2018 and first half of 2019, euro area growth has been slower than in previous years. Surveys of growth imply that the manufacturing sector has led this slowdown, with German manufacturing being particularly affected. This Article uses granular measures of output and the labour market to examine whether the slowdown is concentrated in a small number of sectors or regions, or is more broadly evident.

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Global economic activity has continued to slow during recent months. Over the past year, trade and investment have moderated sharply, business and consumer confidence have declined, while global trade tensions persist and policy uncertainty remains high. At the same time, financing conditions have eased somewhat, as the US Federal Reserve signalled a more accommodative monetary policy stance looking forward.

Read in full: The International Economic Outlook.

The forecasts in this Quarterly Bulletin for 2019 and 2020 are based on the assumption that the UK leaves the EU with an agreement before 31 October 2019. If this transpires, a two-year transition period would come into effect during which time the UK would remain a member of the EU customs union and single market. This would represent the most favourable outcome for the Irish economy but the risk of a disorderly Brexit remains and uncertainty has increased since the publication of our April Bulletin. In this Box, we outline the possible implications of a disorderly Brexit on 31 October 2019 for the performance of the Irish economy in 2019 and 2020.

Read in full: Possible Implications of a Disorderly Brexit for the Short-Term Forecasts.

After falling during the recession, income and consumption have now grown for six consecutive years. The gap between income and consumer spending has widened, with consumers spending a smaller proportion of their disposable income since 2016. The latest Personal Credit and Deposits data show that household deposits rose by €1.8 billion over Q1 2019, the largest increase since Q4 2008. The purpose of this box is to investigate the gap between consumption and income that has emerged since Q1 2016, and to dig deeper on household's income and saving during this period.

Read in full: Consumption and Income Growth in the Current Expansion.

On 23 June 2016, the UK voted to leave the EU and on 29 March 2017 the UK Prime Minister triggered Article 50 - the formal process for countries to officially exit the EU. During the period from the referendum in June 2016 until 31 October 2019, the UK remains a member of the EU with full access to the EU customs union and single market. Despite this, some evidence has already emerged of Brexit-related effects on key UK economic indicators. In this Box, we focus - not on the future potential implication of Brexit for Ireland (which is covered in existing research by the Central Bank and others) - but rather on the performance of the UK economy since the referendum on EU membership in 2016.

Read in full: UK Economic Performance since the EU Referendum and Implications for Ireland

While we can learn much about Multinational Enterprises (MNEs) from data aggregated at the national and sectoral level, this box also examines firm level indicators. Increasing our understanding of the individual MNEs is important so we can appreciate the opportunities and challenges they face as firms. In turn, this will help us to monitor risks and opportunities for the Irish economy as a whole, particularly given the size of many of the MNEs and their activities in Ireland relative to the domestic economy.

Read in full: MNEs and Ireland: A Firm Level Analysis

Deleveraging continues to slow, as on aggregate households are increasing their holdings of assets in deposit accounts rather than paying off liabilities. This increased investment of wealth by households is primarily manifesting itself through bank deposits, rather than with state savings accounts, a trend contrary to behaviour seen during the financial crisis. A similar trend exists for non-financial corporation (NFC) deposits, resulting in household and NFC bank deposits both now standing at all-time series highs.

Read in full: Credit Developments in the Irish Economy.

In a recent Economic Letter (Adrjan and Lydon, 2019), we show how information from online job postings on Indeed’s Irish website can shed light on labour market developments.

Read in full: Labour Demand in Ireland – Insights from Online Job Postings