herald

Saturday 18 August 2018

Recovery is partial, but so much better than no boost at all

Tax revenues €1bn ahead of target, record low interest rates and another reduction in the dole queues. This week has seen the best run of economic good news since the Celtic Tiger expired in 2008.

After six years of unremitting economic bad news, things finally seem to be getting a little better. On Tuesday the end-August exchequer returns were published showing that tax revenues were almost €1bn ahead of target for the first eight months of the year.

The following day the August Live Register revealed that the number of people signing on had fallen to 380,000 on a seasonal basis in August, down more than 35,000 over the past year.

Yesterday it was the ECB's turn to supply us with some good news when it cut its official interest rate to a mere 0.05pc, its lowest ever level. ECB president Mario Draghi also announced that his organisation would purchase up to €500bn of bank assets over the next three years. While this isn't the quantitative easing demanded by many economists, it should still provide a welcome boost to the faltering Eurozone economy.

Downturn

So is the worst economic downturn since independence finally at an end? That, as the man says, depends.

Things have certainly stopped getting worse. The numbers at work are increasing, unemployment is falling, the property market has bottomed out and the public finances have been stabilised.

Unfortunately the economic recovery, such as it is, has been very unevenly distributed. Those lucky enough to be working for the multinationals or indigenous exporters have done best. Elsewhere the recovery has yet to make itself felt.

While employment is up and joblessness is falling, the number of long-term unemployed - those who have been without a job for more than 12 months - is still rising.

Something similar is happening in the property market. While prices are rising once again and the number of mortgages in arrears is down, the number of long-term arrears cases - where the repayments are more than 12 months overdue - is continuing to rise.

The domestic economy has been very slow to recover.

GNP, by far the best measurement of the domestic economy, is still at least 12pc smaller than it was in 2007. Retail sales, which fell by a quarter when the economic bubble burst, remain very depressed. The value of retail sales rose by just 1pc over the past 12 months when volatile car sales are excluded.

Bills

The improvement in the public finances also needs to come with a health warning attached. The Irish state will still need borrow at least €100m a week in 2015 to pay its bills.

So is our recovery just a mirage, mere statistical sleight of hand?

I don't think so. Look around you. All of those 141 and 142 cars look real enough to me. There is a readily-discernible feel-good factor that has been absent since at least 2007.

However, our recovery is very much concentrated in certain sectors of the economy and in certain geographic areas,particularly Dublin.

While we wait for the recovery to take root we should bear in mind that even a partial recovery is better than no recovery.

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