|Output gap? With Google booking 40% of its global sales in Ireland, the answer is that it depends!|
Ireland: The Irish economy achieving "escape velocity" after prolonged downturn, exhausted debt-deflationary headwinds being usurped by mild reflationary tailwinds as credit impulses revive, is a scenario presented by Donal O'Mahony, global strategist at Davy, Ireland's biggest stockbroking firm.
Batteries recharging towards a AAA-credit rated end-game in 2018 as the Irish economy's post-bailout renaissance is unfolding economically and financially triggering a virtuous circle that is forming across rising activity, collateral value and confidence levels.
The renowned American baseball player Yogi Berra (b. 1925) once quipped "It's déjà vu all over again" and Donal O'Mahony's generous use of superlatives gives his latest note [pdf] a bubbletime flavour. William Butler Yeats (1865-1939), the most celebrated Irish poet in the English language is even evoked!
All has changed, utterly, in 2014. The deleveraging headwinds to domestic demand have now blown themselves out, replaced by a mild reflationary tailwind as pent-up demand is finally paroled after a prolonged incarceration. The Irish national accounts are no longer bifurcated, with all components (household consumption, capital spending, residential investment, government consumption, net exports and inventories) all realigned in a positive growth trajectory. This year's 'lightbulb moment' for investors and commentators alike was surely that mid-September release of second quarter GDP data, wherein revelations of a 7.7% annual expansion prompted a blizzard of growth upgrades from all and sundry."
O'Mahony says the requisite "dramatic" improvement in Irish public indebtedness is precisely the prospect now unfolding. A seven-year turnaround from 123% Debt/GDP peaks in 2013 to 77% by end-2020 is deliverable via the combination of sustained trend growth and full divestment of "available for sale" assets.
He acknowledges that there will be bumps on the road: "Nonetheless, the sheer diversity of Irish export markets (both regionally and sectorally) provides some insulation from global trade shocks (as the post-Lehman period demonstrated), whilst the progressive releasing of pent-up domestic demand in a 'lower for longer' policy rate environment represents a further bulwark for expected Irish economic outperformance."
- Finfacts uses superlatives sparingly possibly like the dismal scientists of the Irish Fiscal Advisory Council who this week suggested that a chunk of the GDP growth in the first half of 2014 was smoke;
- In the period 2000-2013, despite a surge in exports, there were no jobs added in the international trading sectors;
- We have for long highlighted that half the value of services exports result from the 'Double Irish' tax dodge and are in effect fake;
- Far from being broad-based, about 40 American firms are responsible for two-thirds of Irish exports;
- Dell is one of Ireland's biggest exporters by booking the output of its Polish plant in Ireland;
- Both GDP, GNP and the Balance of Payments, are significantly distorted by tax avoidance;
- The broad rate of unemployment is 21%;
- Hourly wage costs are below the 2010 level and the majority of the 85,000 jobs added since March 2011 are in: one-person self-employment; public schemes and part-time work;
- 34,000 full-time employee positions have been added since March 2011 and the total number in Q3 2014 was 258,000 below the Q2 2008 level.
43% of rise in H1 2014 GDP from tax-related manufacturing overseas - Irish Fiscal Council
The idiot/ eejit's guide to distorted Irish national economic data
Analysis: Irish full-time employee numbers up 14,000 in year; Broad jobless rate at 21%
Forty American firms account for two-thirds of Irish exports
Irish Economy 2014: Jobless exports boom 2000-2013
Irish Economy: Average hourly total labour costs fell 1.9% in four years to Q3 2014
Irish home ownership to fall due to affordability
Irish Pensions: 50% of all 35-45-year-olds have no occupational pension
Irish commercial property annual return to September 2014 at 36.6% - income at global high - prime office rents heading for top of EMEA ranks - good or bad?