Economic View: Irish consumers motoring again?; Goodbody chief economist, Dermot O’Leary, comments - - "After the fear induced collapse in Q1 2009, consumer spending in Ireland is showing some tentative signs of life. The latest evidence comes in the form of car sales statistics for April. The Society of the Irish Motor Industry (SIMI) confirmed yesterday that car sales almost doubled in April (+95%) relative to a year ago, leaving sales in the year-to-date up by 38%. Granted, this increase is off a small base, given that sales are still less than half the level seen in the first four months of 2008.

However these data also follow an uptick in consumer confidence at the beginning of 2009 and an improvement in retail sales volumes. Like in most countries that introduced the scheme, the scrappage scheme has acted as a significant incentive for consumers (accounts for around 10% of purchases so far), but increased confidence and thus reduced precautionary saving on the part of consumer is also likely to be at play. We commented extensively in our most recent commentary (In calmer waters, 6 April 2010) about the headwinds to consumer spending, including continued job losses, falling incomes and a higher tax burden. These issues are still around and we will need more evidence to change our view that consumer spending is likely to fall again this year. Nevertheless, it is important to recognise the more positive signs from the Irish consumer."

Economic View: Markets calling European policymakers’ bluff again; Dermot O’Leary said:"It is becoming a common theme, but the markets are once again not convinced about the rescue package for Greece. While we commented about the underwhelming market response on Monday to the rescue plan, markets took an even harsher view of the plan yesterday, with Greek and other peripheral bonds falling sharply, the Euro falling to below $1.30 for the first time since April 2009, and equity markets experiencing a renewed bout of nervousness.

Irish bonds, as one might expect got caught up in the concern, with yields on the 10-year bond rising by 18bps to 5.28%, putting the spread over German bunds at 234bps. Concerns seem to centre on a number of areas: (1) that the rescue package is not big enough; (2) that the Greeks will not be able to enact the agreed reforms; (3) that it will be politically difficult to get the backing for the plan in Germany and; (4) that contagion fears will mean other countries will eventually need support. As we discussed yesterday, Ireland can afford to stay out of the bond market in the short term given that the NTMA has taken a rather pragmatic approach to pre-funding in the recent past. Nevertheless, it is in everyone’s interest that these fears are reduced. European policymakers may be forced into thinking the unthinkable once again: An even bigger rescue package and/or ECB quantitative easing might have to be considered."

Irish consumer spending continuing to recover: Davy chief economist, Rossa White, comments - -"The recovery in Irish consumer spending continued in April. New car sales climbed from last year's depressed base. Later this week, official data are likely to show that most of the rest of the retail sector recovered further the previous month. It all suggests that precautionary saving is beginning to ease, as incomes are probably not yet growing.

Car sales epitomised the collapse in consumer demand in early 2009. Of course, the Irish car market is unusual in the European context. The blatant display of the year of registration skews sales to the first half of the year. Dealers knew their fate by early summer last year: total sales were only 42,000 by end-May 2009, down 64% year-on-year (yoy). The final total for 2009 was just 57,460, the lowest since 1987. But sales have bounced from that incredibly depressed base. Sales jumped 95% yoy in April and were about 38% higher in the first four months. We forecast a total of around 80,000 for the full year, although that would only equate to the level seen fully 15 years ago in 1995.

As a big ticket item, car sales are a useful barometer nonetheless. The rise in sales would be even more potent if credit standards were beginning to ease. That will have to wait in Ireland. Based on this week's Fed senior loan officer in America, the inherent lag between the end of recession and easing lending standards is as much as nine months. Twinned with the first consecutive rise in retail sales since 2007 and two-year high for consumer confidence, the recovery in car sales suggest that panic saving is abating. Even though disposable income will not expand until H2, it is enough to give consumer spending a slight lift."

The correction in stock markets has already started, Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, told CNBC Wednesday: