Irish economy - are there clouds ahead?

I noticed a lot of people in Lidl yesterday. A larger proportion than normal appeared to be Irish.

I figure one of the first indicators we will get that things are changing is when we see Lidl and Aldi's market share start to increase again - it's stalled for the last while.
 
whathome : Finfacts article - Irish economic dependency on property

Comment: Irish Property Boom - It's easy to underestimate how much economic prosperity depends on it

http://www.finfacts.com/irelandbusin...10007932.shtml

Another interesting look at how dependent the economy is on the property market. As David McWilliams said, if you exclude property - there's not a lot going on here!
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absolutely concur with that. Actually I've been singing it from the rooftops on this thread and the one about property prices over the last 6 months or so.

I'll be watching Mcwilliams programme with interest tonight - more so to see the reaction to it than its actual content - I've read the book and pretty much agree with his take on "bubble economy" that has emerged over the last 3 years or so. He has been saying this for ages and has been derided as an overwrought cassandra by all our "new paradigm" economists (who all co-incidentally have very definite VI in the continuing acceleration of the Property sector - all "independent" economists have been sitting the bunker with the crash helmets on for quite a while now) so now that there has been a wobble? stall? soft landing? start of crash? in the property sector I wonder will he be taken a tad more seriously this time? hmmm!!!

view from the ground.

In our industrial estate , down here in the Dublin docklands , is becoming quite a lonely place recently - compared to 3-4 years ago it is positively depressing - at least 4 companies have closed down, 3 other seriously downsized in the last months alone - the only replacements have been a gourmet coffee and cakes shop and an importers office - sign of the times or what? - this in an enterprise centre incubating Ireland's next technology generation - I wonder... as I watch the cranes swinging over the next lot of overpriced yuppie hutches going up across the way.

No surprise tho - Despite all the promises , and more listening to the FF Ard fheis on Saturday (NB never never watch a political lovefest at the same time as ironing shirts - bad for the temper - bad for the shirts!) getting venture cash for new tech businesses is harder than ever. There is a generation of financiers coming of age knowing only property as the only sure thing - tech is way too risky - This could stunt our development here for generations - never mind all the promises and visions from the gang in citywest on Saturday - as B.A. well knows - cash is your only man!.

Later
 
The fundamental point in website link above is that the "government collects $100k in taxes(direct/indirect) for every house built.At projected 2006 new house build rate of 100k ,thats' a massive tax take of $10billion from new builds alone.
Add in another $5b for stamp duty on 2nd hand houses,cgt on property and indirect construction related jobs.

I believe ytd tax take at October was $33b so say $40-$42b for full year.

Construction accounts for 35-40% based on figures above-any down turn in new house builds will have serious implications for Irish economy unless alternative revenue streams can be found(highly unlikely and only sources would be increasing VAT/PAYE or reducing public spending).

The gravy train has stopped(EEC Contributions) and there are lower cost alternatives for new industry to set up in within EEC and obviously beyond.
Ireland is in for some tough times unless we keep building at close to 100k pa or discover oil of coast.
 
http://www.moneyweek.com/file/20809/why-western-workers-are-set-to-become-poorer.html

When i hear our "financial experts" say that a slowdown in house price inflation is a good thing as it will allow wages to catch up with salary multiples,i wonder what pipe dream their living in.

Why do we think we are so special that we can continue to give ourselves pay rises regardless of what the rest of the world is doing ?

There is only 1 solution to our present difficulties,you just have to read between the lines !.
 
The employment boom in the last 4 years has been built around 3 main areas.

1-Construction employment has doubled adding approx 100-130k jobs

2-Public Sector employment has increased dramatically accounting for another 100-150k jobs

3-Finally retail/finance sector employment has increased 25-30% due to consumer credit boom & construction boom.

I can't see any of these factors continuing in the near future,in fact for all three,I will be amazed if current employment numbers are held.

Pay in Ireland is not out of sequence with old EEC members(average industrialised wage $32k from memory) but employment growth cannot continue at current rate.

Given the above,Irish economy is in for some very tough times and I can only see recession ahead in the near future but hopefully I'm wrong
 
thewatcher said:
http://www.moneyweek.com/file/20809/why-western-workers-are-set-to-become-poorer.html

When i hear our "financial experts" say that a slowdown in house price inflation is a good thing as it will allow wages to catch up with salary multiples,i wonder what pipe dream their living in.

Why do we think we are so special that we can continue to give ourselves pay rises regardless of what the rest of the world is doing ?

There is only 1 solution to our present difficulties,you just have to read between the lines !.
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Interesting article. This quote was illuminating:
Some would argue that the worst of the arbitrage is over – as wage inflation now takes off in China and India. Don’t count on it. Our estimates suggest that even after five years of double-digit wage inflation in China, hourly compensation for Chinese manufacturing workers remains at only 3% of levels prevailing in the major industrial economies.
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The fact that we are hoping to grow our economy sufficiently to justify our extraordinary house prices just shows how muddled our thinking is.
 
http://www.rte.ie/business/2006/1108/central.html

Central Bank is talking to the banks about tightening of lending rules. Clearly this is to prevent banking collapses at the margin if there is a hard landing in the property sector.

The Central bank senior management do not want to be exposed if a building society were to go under.

This will slow further speculative property developments.
 
shanegl said:
I think so. I was shocked they included an overvaluation figure. I can't reconcile this with their other report that says the economy is in good shape.
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You shouldnt be shocked - the property prices are overvalued by a lot more than 14% - The Central Bank is trying us to show they are doing their job by just hinting at what is certain to become a crisis but their lords and masters are telling them in no uncertain terms not to rock the boat. Therefore we get double speak. The Central Bank dont have any real work to do since power went to Europe and there is little justification for many of the positions so they aint going buck when they get a kick.
 
makindye said:
You shouldnt be shocked - the property prices are overvalued by a lot more than 14% - The Central Bank is trying us to show they are doing their job by just hinting at what is certain to become a crisis but their lords and masters are telling them in no uncertain terms not to rock the boat. Therefore we get double speak. The Central Bank dont have any real work to do since power went to Europe and there is little justification for many of the positions so they aint going buck when they get a kick.
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If they revealed their truw feelings they could be accused of precipitating a crash. The dogs in the street know the market is very very overvalued.
 
I'd recommend reading the report at [broken link removed]

They used a few different models to guage the "overpricedness". Each different model would give a different percentage for how overvalued the market is.

The 14% figure was quoting the model that gave the lowest percentage overpricing. The model which resulted in the highest overpricing gave 73%!

So it looks like RTE cherry picked the low number to make it look not that bad.

Check out the graph on the bottom left of page 28 on the full report.

scarey.
Here is a snap of it:
[broken link removed]
 
The rather anodyne 'Daft' quarterly report (published today) notwithstanding, the other economic news today relevant to the Irish economy is the rise of UK interest rates to 5% (which strong indication of another quarter-point rise in February 2007) and the news item that B&Q Ireland have announced a 48% drop in profit.
 
Central bank thinks property over valued by 15% and 60% of all lending is for property. Now if there is a soft landing in property what are the banks going to lend to ? IMO parts of the property lending has been very lucrative for the banks particularly the development piece.

A fall off in lending could wipe out the profits and the need to restructure could cost huge amounts just as profits are falling.

Hence the reform of the pensions is on the agenda at the moment just in case things get tough in future. Much easier to push this thru in good times. However if times gets tough it makes existing employees with big pension entitlements much more expensive than new employees.

Germany has seen this with older employees being replaced by contract employees who now make up 25% of the total.
 
That is very sobering and illustrates the widening 'stretch' between anything resembling production and the services/public sector. This clear reasoning and vision indicate an almost-total absence of economic understanding or planning. Really sad!
 
bearishbull said:
[broken link removed]
More worrying commentary on IRish economy.
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IMO as above the growth in public sector costs is the real elephant in the room as these costs cannot be pared back if times get tough.

Readjustment to slower growth in taxes will take years and will as McDowell states require higher rates of tax to drive taxes up to a balanced budget as required by the euro. These higher rates of tax could be necessary just as economy need the opposite.
 
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Maine said:
Central bank thinks property over valued by 15% and 60% of all lending is for property. Now if there is a soft landing in property what are the banks going to lend to ? IMO parts of the property lending has been very lucrative for the banks particularly the development piece.
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Clearly the CB is getting a bit antsy about the speculative nature of a lot of its lending; as demonstrated in their report this week:
[broken link removed]

Their proposals look to try and cut speculative lending down while extending other types of lending further:
The Central Bank is proposing to force banks to increase capital reserves on speculative property lending, but it will reduce the capital reserves required by banks lending to owner-occupiers of property.
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In reality, I wonder how they could force the banks to do this however. If a Dutch or British bank decided to provide loans to the Irish market but desregard the Irish CBs recommendations, what can they do?

Maybe this is just doublespeak by the CB to cover themselves should they be accused of doing nothing about (or worse, facilitating) a possible bust?
 
Can someone post a link to a breakdown of Irish GDP by sector?
 
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