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... so what's the view from Dublin?

Austin Hughes

Published 26/01/2016

The International Financial Services Centre in Dublin
The International Financial Services Centre in Dublin

Last year was the year we said a proper goodbye to the downturn in Ireland. What precisely might replace the pain remains unclear. There is a strong sense that conditions should be notably better than those experienced since 2008 - a not particularly demanding expectation. Equally, there is widespread scepticism that we might return to the boom, a possibility hinted at both in the strength of recent economic releases and the scale of largesse emerging in political promises.

On some measures, it might seem the boom is already back. Current estimates put GDP growth at around 7% in 2015 which would be the strongest performance since 2000. With car sales surging, unemployment tumbling and worries about a shortage of housing, there are clear echoes of earlier times.

Confidence surveys appear to send a similar message. The KBC/ESRI consumer sentiment index posted a new 10-year high in December while business sentiment, as measured by the index KBC developed with Chartered Accountants Ireland, reached its strongest level in over nine years.

Firms and households both seem to be signalling that things are clearly improving. However, the details of these surveys suggest the future looks quite different to the past. They suggest caution rather than confidence is the key feature of the upswing.

For the majority of firms, the business sentiment survey suggests 2016 is starting on a very positive note. Almost two-thirds (65%) say activity levels increased in the past three months compared to just 6% that reported weaker trading conditions. This suggests a very broadly based upswing is under way and is expected to continue.

Significantly, the survey suggests companies are adjusting their output and staffing levels in response to, rather than in anticipation of, improving demand. Usually, at this stage of the cycle, growing 'animal spirits' would prompt firms to scale up production and add aggressively to their payrolls. Instead, it seems the painful experience of recent years, coupled with a quite uncertain global backdrop, is producing an altogether more cautious approach.

For Irish consumers, the recovery in confidence has been a very different process. For a considerable time, consumers were reading about an improving Irish economy entirely removed from a continuing deterioration in their personal finances. This stark divergence, between the blossoming recovery of media reports and the financial strains consumers were experiencing, didn't make for happy households.

Importantly, through the past year, a sense that Irish consumers might be beginning to share in the economic upturn has begun to build.

Belfast Telegraph

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