‘2016 – Economic Outlook for Ireland & Eurozone’
IFP LaunchDecember 3rd 2015
Jim
Power
Global Background
• US & UK growing at reasonable pace
• Euro Zone growing well below potential
• Emerging markets in some difficulty – China!
• Policy will very accomodative in Euro Zone
• US rates set to rise very gradually, UK cycle less clear
• Oil & Commodity prices weak
• Euro weakness to persist
• Migration crisis has highlighted yet again the lack of policy coherence at EU level
UK GDP (YoY)
-8
-6
-4
-2
0
2
4
6
Q100
Q300
Q101
Q301
Q102
Q302
Q103
Q303
Q104
Q304
Q105
Q305
Q106
Q306
Q107
Q307
Q108
Q308
Q109
Q309
Q110
Q310
Q111
Q311
Q112
Q312
Q113
Q313
Q114
Q314
Q115
Q315
US GDP (YoY)
-10
-8
-6
-4
-2
0
2
4
6
8
10
Q100
Q300
Q101
Q301
Q102
Q302
Q103
Q303
Q104
Q304
Q105
Q305
Q106
Q306
Q107
Q307
Q108
Q308
Q109
Q309
Q110
Q310
Q111
Q311
Q112
Q312
Q113
Q313
Q114
Q314
Q115
Q315
Euro Zone Economic Checklist
GDP (Q3 YoY) Inflation (YoY) Unemployment
Euro Zone 1.6% +0.1% 10.8%
Germany 1.7% +0.2% 4.5%
France 1.2% +0.2% 10.7%
Italy 0.9% +0.3% 11.8%
Spain 3.4% -0.9% 21.6%
Netherlands 1.9% +0.4% 6.8%
Belgium 1.3% +1.2% 8.7%
Greece -0.4% -0.1% 25.0%
Portugal 1.4% +0.7 12.2%
Euro Zone GDP (YoY)
-8
-6
-4
-2
0
2
4
6
Q100
Q300
Q101
Q301
Q102
Q302
Q103
Q303
Q104
Q304
Q105
Q305
Q106
Q306
Q107
Q307
Q108
Q308
Q109
Q309
Q110
Q310
Q111
Q311
Q112
Q312
Q113
Q313
Q114
Q314
Q115
Q315
USD v EURO
0.9
1
1.1
1.2
1.3
1.4
1.5
Sterling v Euro
0.6
0.65
0.7
0.75
0.8
0.85
0.9
Euro Zone in 2015
• Economic growth to remain below potential
• GDP 1.5% 2015, 1.8% in 2016?
• ECB will struggle to hit 2% inflation target
• € set to remain weak (I think)
• ECB may cut deposit rate further and increase monthly QE target
• Greater clarity needed on policy & governance
Ireland-Activity Has Surpassed 2007
0
10,000
20,000
30,000
40,000
50,000
60,000
19
97
Q1
19
97
Q3
19
98
Q1
19
98
Q3
19
99
Q1
19
99
Q3
20
00
Q1
20
00
Q3
20
01
Q1
20
01
Q3
20
02
Q1
20
02
Q3
20
03
Q1
20
03
Q3
20
04
Q1
20
04
Q3
20
05
Q1
20
05
Q3
20
06
Q1
20
06
Q3
20
07
Q1
20
07
Q3
20
08
Q1
20
08
Q3
20
09
Q1
20
09
Q3
20
10
Q1
20
10
Q3
20
11
Q1
20
11
Q3
20
12
Q1
20
12
Q3
20
13
Q1
20
13
Q3
20
14
Q1
20
14
Q3
20
15
Q1
GDP at Constant (Chain linked annually ref to 2013) Market Prices (Seasonally Adjusted) (Euro Million)
GNP at Constant (Chain linked annually ref to 2013) Market Prices (Seasonally Adjusted) (Euro Million)
The Irish Economy in 2015
• Compelling economic recovery – more broadly based
• Consumer stronger, but price compression still relevant
• Strong car sales +30%
• Strong merchandise exports +19.3%
• Labour market much better
• Consumer confidence at 9-year high
• Tax Revenues +9.6%
• Construction activity improving
• Prospects for 2016 positive – but arrogance & complacency dangerous
Ireland-Consumer Price Inflation
-8
-6
-4
-2
0
2
4
6
8
Jan
-00
Jun
-00
No
v-0
0
Ap
r-0
1
Sep
-01
Feb
-02
Jul-
02
De
c-0
2
May
-03
Oct
-03
Mar
-04
Au
g-0
4
Jan
-05
Jun
-05
No
v-0
5
Ap
r-0
6
Sep
-06
Feb
-07
Jul-
07
De
c-0
7
May
-08
Oct
-08
Mar
-09
Au
g-0
9
Jan
-10
Jun
-10
No
v-1
0
Ap
r-1
1
Sep
-11
Feb
-12
Jul-
12
De
c-1
2
May
-13
Oct
-13
Mar
-14
Au
g-1
4
Jan
-15
Jun
-15
Ireland-Unemployment Rate (%)
0
2
4
6
8
10
12
14
16
Feb
-98
Au
g-9
8
Feb
-99
Au
g-9
9
Feb
-00
Au
g-0
0
Feb
-01
Au
g-0
1
Feb
-02
Au
g-0
2
Feb
-03
Au
g-0
3
Feb
-04
Au
g-0
4
Feb
-05
Au
g-0
5
Feb
-06
Au
g-0
6
Feb
-07
Au
g-0
7
Feb
-08
Au
g-0
8
Feb
-09
Au
g-0
9
Feb
-10
Au
g-1
0
Feb
-11
Au
g-1
1
Feb
-12
Au
g-1
2
Feb
-13
Au
g-1
3
Feb
-14
Au
g-1
4
Feb
-15
Au
g-1
5
Ireland-Employment Q3 2015SECTOR ANNUAL
CHANGEEMPLOYMENT % OF TOTAL
Agriculture F&F +3,000 112,700 5.7%
Industry +13,500 252,300 12.7%
Construction +15,000 127,400 6.4%
Wholesale & Retail Trade -1,400 273,800 13.8%
Transportation & Storage +2,500 90,000 4.5%
Accommodation & Food Services +100 139,900 7.1%
Information & Communication +4,400 83,700 4.2%
Financial, Insurance & Real Estate -3,300 99,800 5.0%
Professional & Scientific +5,700 122,600 6.2%
Administrative & Support Services +2,800 68,000 3.4%
Public Admin & Defence +3,200 101,300 5.1%
Education +2,500 146,600 7.4%
Health & Social Services +3,9,00 253,400 12.8%
Total (may not add up due to rounding &
omission of Other Category)+56,000 1,983,00
Ireland-Employment (S/A)
1000
1200
1400
1600
1800
2000
2200
2400
19
98
Q1
19
98
Q3
19
99
Q1
19
99
Q3
20
00
Q1
20
00
Q3
20
01
Q1
20
01
Q3
20
02
Q1
20
02
Q3
20
03
Q1
20
03
Q3
20
04
Q1
20
04
Q3
20
05
Q1
20
05
Q3
20
06
Q1
20
06
Q3
20
07
Q1
20
07
Q3
20
08
Q1
20
08
Q3
20
09
Q1
20
09
Q3
20
10
Q1
20
10
Q3
20
11
Q1
20
11
Q3
20
12
Q1
20
12
Q3
20
13
Q1
20
13
Q3
20
14
Q1
20
14
Q3
20
15
Q1
20
15
Q3
Ireland-Competitiveness
80.00
85.00
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
130.00
Jan
-95
Au
g-9
5
Mar
-96
Oct
-96
May
-97
De
c-9
7
Jul-
98
Feb
-99
Sep
-99
Ap
r-0
0
No
v-0
0
Jun
-01
Jan
-02
Au
g-0
2
Mar
-03
Oct
-03
May
-04
De
c-0
4
Jul-
05
Feb
-06
Sep
-06
Ap
r-0
7
No
v-0
7
Jun
-08
Jan
-09
Au
g-0
9
Mar
-10
Oct
-10
May
-11
De
c-1
1
Jul-
12
Feb
-13
Sep
-13
Ap
r-1
4
No
v-1
4
Jun
-15
Nominal HCI (Monthly average) Real HCI (Deflated by consumer prices) Real HCI (Deflated by producer prices)
Ireland-House Price Index
0
20
40
60
80
100
120
140
160
Jan
-05
May
-05
Sep
-05
Jan
-06
May
-06
Sep
-06
Jan
-07
May
-07
Sep
-07
Jan
-08
May
-08
Sep
-08
Jan
-09
May
-09
Sep
-09
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
National - all residential properties National excluding Dublin - all residential properties Dublin - all residential properties
Private Rents
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
120.0
125.0
130.0
Jan
-05
May
-05
Sep
-05
Jan
-06
May
-06
Sep
-06
Jan
-07
May
-07
Sep
-07
Jan
-08
May
-08
Sep
-08
Jan
-09
May
-09
Sep
-09
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
(Jan
20
05
=10
0)
Ireland-New Mortgage Lending
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1-Q3
FTB Purchase Mover Purchase RIL Purchase Re-mortgage Top-up
Ireland-PDH Mortgage Arrears >90 Days
Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215
3.33.6
4.14.6
5.1
5.7
6.3
7.2
8.1
9
9.9
10.6
11.511.9
12.312.7 12.9
12.612.2
11.8
11.2
10.4
9.89.3
What is pushing the Residential Market?
• National Prices +35.4% off lows: Dublin +52.7%; Rest +24.1%
• Year to Date National +7.6%; Dublin 4.5%; Rest 8.6%
• Rental market chaotic Private Rents 35.6% off lows
Pent-Up Demand meets Limited Supply
• Improved confidence about future
• Economic recovery
• Stronger labour market
• Mortgage market showing some signs of life
• Central Bank limits having impact – sensible policy
Needs to be focus on increasing supply
21
Prospects for 2016
• GDP 6.3% 2015 4.5%+ 2016
• Consumer expenditure will be boosted by employment & earnings growth & Fiscal Policy
• Construction sector will continue to rebound strongly
• Business investment spending to grow strongly
• Unemployment rate could hit 7%
• Promises to be another good year
The Ongoing Issues• Oil, € weakness, Interest Rates, US & UK growth all good for Ireland
• China a concern
• UK & the EU
• Regional balance
• Satisfying demand for housing
• Competitiveness – broadly defined - must be the constant focus
• Preserving the FDI model
• Credit model for the SME sector
• Sovereign & Personal Debt
• Political instability and poor policy – popular policies are rarely good policies
• Economy is moving in right direction, but careful management needed
Rebuilding the Irish Economic model
• Sustainability & Stability key attributes
• Sectoral diversification – focus on competitive advantage
• Constant search for FDI trends
• Competitiveness crucial
• Business costs, Quality of Public Services, Infrastructure, Labour Force, Tax Environment, Credit Model, Political Stability & Sensible Policy
• IT Infrastructure & Capability crucial
Irish GDP Growth
-8
-6
-4
-2
0
2
4
6
8
10
12
14
%