Table of the Week
Remember the Good Auld Days (in 2008) when rents on Grafton Street were the fifth highest in the world overtaking London and Tokyo? Not any more. According to CBRE’s review of global retail rents this week, Dublin has now fallen to 32nd position, and based on Jones Lang LaSalle’s latest quarterly index and review of Irish commercial property, we are still sliding. Of course these are market rents we’re talking about in CBRE’s figures, some retailers on Grafton Street (see below) haven’t been shy in complaining that they continue to pay boom-time rents because of Upward Only Rent Review leases.
Quotation of the Week
“ ” The bailout Troika news conference. Which again didn’t happen at the conclusion this week of the seventh review “mission”. The Troika didn’t hold a press conference after the previous review, the sixth, either, citing sensitivities towards the imminent Fiscal Compact referendum. So alas this week, we didn’t get an update on what Dublin Airport taxi-drivers think of the economy, nor did we witness veteran journalist Vincent Browne fillet an ECBer on live TV and we certainly didn’t get to see a master-class in media manipulation by a press officer. Shame!
“But if I say that, my friends in Europe will offer me the minimum. So I’m not going down that road. You must never have been at the Fair of Glen or sold a calf” Minister for Finance Michael Noonan at the Alternative Troika Press Conference (pictured above), where alongside Minister for Public Expenditure and Reform, Brendan Howlin, he fielded questions on the seventh Troika review “mission”. When asked what would be the minimum debt write-down he would seek in Europe, this was his response, which might make far more sense to people than the “we’re involved in technical discussions to re-engineer the debt”.
“Do you want us to continue because we have been with NAMA all day and we actually think that the difficulties they had have been overcome and that they’re an effective organization” Words attributed to the NAMA advisory board by Minister Noonan at the same press conference. The NAMA advisory board comprises Michael Geoghegan, Denis Rooney and NAMA’s own chairman Frank Daly. Which of them actually said those words wasn’t revealed; hopefully it was someone less partial than Frank Daly!
Image of the Week
Over the Border this week, there was the annual Twelfth of July holiday where the victory of Protestant King William III over the Catholic King James II at the Battle of the Boyne in 1690 is remembered. One man’s victory of course is another man’s defeat, so the celebrations that take place each year in Northern Ireland are divisive but thankfully, violence and disorder this week were reportedly down on previous years. Representatives of both “sides” shamed themselves, with rioting in Catholic parts of the Ardoyne district of north Belfast and live rounds shot at the PSNI, condemned roundly by the majority on both “sides”. But the incident at Donegall Street in Belfast city centre (pictured above) was more insidious. A video emerged on Friday which shows a band playing the tune to a song long outlawed at Rangers football matches in Scotland – “The Famine Song”, lyrics here, for those of us on this side of the Border who’ve never heard it, it’s the tune of the Beach Boys “Sloop John B/Well I feel so broke up, I want to go home” but the words replaced with what would generally be regarded as pretty offensive lyrics. The video apparently shows members of the Shankill Young Conway Volunteers parading in circles in front of a Catholic church, with a PSNI motorcycle policeman and Orange Order looking on. The person doing the video recording – available here – is apparently manhandled, though the PSNI officer comes to his aid. Let’s hope that both “sides” redouble their efforts to stamp out the criminality and stupidity, in which neither side holds a monopoly.
Political carnival game of the Week
“Whack a Mole”
“It seems to me that Deputy Martin is exceptionally well briefed, even without the help of the Freedom of Information Act, but that is nothing new” An Taoiseach Enda Kenny during Leaders’ Questions on Wednesday last, strongly implying there is a Fianna Fail mole or moles in Government Buildings or indeed buildings close-by, and indeed some might interpret Enda’s comments to signify that there is a three-point conduit between the mole, Fianna Fail and the press whereby confidential information is provided by a civil servant to Fianna Fail who then pass it on to the press, where the leak is publicly verified through Freedom of Information requests. Rumours abound in (some) political circles that there is indeed an ongoing mole-hunt with a career civil servant in his late 40s firmly in the cross-hairs.
Economic confusion of the Week
Were the latest GDP/GNP figures for Ireland good or bad?
“Domestic economy expands for first time in two years. THE DOMESTIC economy grew for the first time in two years in the first three months of 2012, according to figures published accidentally yesterday on the website of the Central Statistics Office.” Dan O’Brien and Mary Minahan in the Irish Times this week.
“The CSO figures are to be welcomed” Minister Noonan at the Troika press conference on Thursday
We found out during the week that during the first quarter of 2012, the economy shrank. GDP declined by 1.1% from the previous quarter and GNP declined by 1.3%. So that was bad? Yes, but what confused matters was the upwards revision of the Q4,2011 quarter-to –quarter figures – GDP was revised from -0.2% to 0.7%, whilst GNP remained the same, which meant that for the whole of 2011, GDP rose by 1.4% (previously 0.7%) and GNP fell by 2.5% (previously 2.5%, unchanged). And that was good in terms of GDP. So overall, were the figures released this week good or bad? Given that the upwards revision to GDP in Q4,2011 was seemingly more than offset by the contraction in Q1, 2012 you would have to say that the figures for GDP were overall bad. And the figures for the domestic economy – the one that arguably matters most and is represented by GNP – remain unchanged for 2012 with a contraction of 2.5% followed by a decline in Q1, 2012 of 1.3%. And these figures are “to be welcomed”!
Many of us are still scratching our heads at the Irish Times claiming “the domestic economy grew for the first time in two years in the first three months of 2012” – perhaps that was Mary Minahan’s contribution to the article, rather than the Irish Times’ own economics editor Dan O’Brien! Economist and UCD professor and Forbes contributor, Karl Whelan felt it was Orwellian (see his tweet above).
Runner-up might go to Minister Noonan who said at the Troika news conference on Thursday “Economists would say that if your debt:GDP ratios are over 100% then you’re getting into difficulties, not that you can’t pay your way, but the point I made earlier that it begins to impact adversely on your growth rates”
Hmm, if it is only at 100% debt:GDP that things go awry, why not increase the 60% cap in the Fiscal Compact? Mainstream economic wisdom is that it is above 90% debt:GDP that future economic growth is so threatened as to make that debt level unsustainable. Let’s hope that the 100% figure is not to the fore of Minister Noonan’s mind in his ongoing negotiations in Europe!
“A spokesman for the Department of Finance said: “This is the half-way point of the programme. We’ve implemented over 120 measures and we’ve drawn down about 78.5 per cent of the funding.”
That is a very high percentage lot of the funding drawn down for the half way point. . My bet is that the worst of the measures are yet to come.
Agreed, when account is taken of the €18.5 bn cumulatitive/aggregrate tax increases and cuts which NWL estimates will be required over the next few years.
In my experience it is not unusual to draw down much of your funding in the early days of any project – but nearly 80% when you’re only half way through seems high alright.
The Dept. of Finance also said they expect it to be harder to meet the Troika’s approval too in the coming months, given that the low hanging fruit is gone and future targets are set against expected growth in the economy. So, yes, it’s impossible to see anything other than more spending cuts and tax increases.
The usual suspects down the food chain better start getting ready for more unpleasant medicine – domestic consumption, anyone?
As Mr Michael Noonan once said ” the job is not even half done”
8.6 Bln of cuts looks relatively easy compared to 15 bln of cuts due to the mystical “Growth” not having appeared.
Brazil is slowing down, the juggernaut of China is slowing down, and there are no shortage of fools in Ireland who believe spending more on social welfare leads to greater social cohesion. The fact that 1/2 the products on the supermarket shelves are produced by foreign manufacturers is of course irrelevant.
Freddy Kruger could not have made it up, not even in his wildest dreams.
There really should be no confusion regarding our economic performance. We are a weak part of a wider Eurozone that is suffering unemployment levels not seen since the 1930s. That zone is missing one vital ingredient to cure our economic ills – and that ingredient is growth. And the one sure fire way to ensure growth is by devaluing the Euro. That’s the choice for the Germans and the rest of the eurocrats. It’s either devaluation or more taxes and more borrowing resulting in an even deeper recession.
The results of the current euro policies can be seen with BMW, Mercedes Benz and now Airbus opening manufacturing plants in the southern States of the USA where they have access to cheap productive labour and a business orientated economy. Europe’s big industrial producers are voting with their feet – and we should take heed of this as a leading indicator of where the wider European economy is headed.
Neither we, Greece or Spain can take the half-century of mass unemployment and debt deflation that it would take us to become as competitive as Germany. In the end it’s either devaluation and the printing of euros or the break-up of the eurozone. It won’t be palatable to Germany, but that’s the choice.
Down from 1.60 in 2008 to 1.22 today, it’s past time to switch to Dollars. We are headed for parity.
On the subject of declining euros
fist rap ever on this blog?
http://wp.me/p28tG9-iO
skewed to the downside
Not really. It’s well known that the Irish Times is an intellectual propaganda rag for the government and the banks. They’ll print whatever they’re told.
The real problem is that people believe it…. well, Irish Times readers believe it in any case. Unfortunately, they happen to be the nouveau Ascendancy in charge of the country. I bet they’ll get so riled up about that famine song that they’ll commission a big op-ed about how progressive, well run, and successful the country has been under their administration, and how grateful other countries should be for all the Irish emigrants flocking abroad once more.
Nothing would surprise me anymore.
Sorry, about the Irish Times quote, what is is that was wrong about it?
Annex 3B on the QNA does day that domestic demand grey by 1.5% between Q4-2011 and Q1-2012.
Or was it simply the intepretation (that it was likely due to the purchase of aircraft)?
@Rob S
“Domestic economy expands for first time in two years”
“Domestic economy” equals either GDP or GNP, most people would regard it as GNP.
Both GDP and GNP decline in quarter one.
@ NWL There is far too much dependence placed on these very early first estimates by the CSO. The size of the revision in the previous quarter should act as a warning to everyone. Indeed the CSO has not even started looking at company accounts for 2011 and the 2011 figures published on Thursday last will be revised again on more than one occasion.
Looking at the Income tax figures for the first six months of 2012, and adjusting for the USC error & Budget changes, yield is growing quite strongly, suggesting a reasonable improvement in economic activity.
The Corporation Tax figures (again adjusting for the late payment received in January 2012 but due in December 2011) also suggest an expectation of increased activity and profits in 2012, preliminary tax payments in May & June were well up on 2011 and well ahead of the revised profile.
May I suggest that we are looking at annual GDP growth of around 2%? I know it is unpopular to see the glass half-full.
I think 2% nominal GDP growth is around right for this year. Inflation will be close to 2% so that would require real GDP to be flat which is reasonable.
@NWL
“Domestic economy” equals either GDP or GNP, most people would regard it as GNP.”
That is not true.
Domestic Economy means a combination of Government spending, consumer spending and investment (GDP minus exports and imports).
It is a well-defined definition.
http://cso.ie/en/media/csoie/releasespublications/documents/economy/2012/qna_q12012.pdf
Page 12 Annex 3B. Domestic Economy increased by 1.5% q-on-q.
I am not going to pretend the numbers are encouraging an an underlying basis (as the main reason for it was aircraft investment) but the headline is correct.
@Rob S, I think we may have to agree to disagree on this one!
Page 12 Annex 3b is not the “Domestic Economy” – it is “Domestic Demand”
GDP and GNP are the standard measures of economic activity in a country.
Referring to the definitions in the CSO notes
“Gross Domestic Product (GDP) represents the total value added (output) in the production of
goods and services in the country.
Net factor income from the rest of the world (NFI) is the difference between investment
income (interest, profits etc.,) and labour income earned abroad by Irish resident persons and
companies (inflows) and similar incomes earned in Ireland by non-residents (outflows). The data
are taken from the Balance of Payments statistics. However the components of interest flows
involving banks in this item in the national accounts are constructed on the basis of “pure” interest
rates (that is exclusive of FISIM) whereas in the balance of payments the FISIM adjustment is not
carried out. There is an equal and opposite adjustment then made to the imports and exports of
services in the national accounts which is not made to these items in the balance of payments. The
deflator used to generate the constant price figures is based on the implied quarterly price index
for the exports of goods and services. In some years exceptional income payments have had to be
deflated individually.
Gross National Product (GNP) is the sum of GDP and NFI. Because NFI is the difference
between two large gross flows, itsmagnitude can fluctuate greatly from one quarter to another. This
can lead to significant differences between the GDP and GNP growth rate for the same quarter.”
I think you are relying way too much on the fact the general media have been enthused over the past couple of years in calling GNP the domestic economy – it is not – it is simply a better measure of the domestic economy than GDP for the all too obvious reasons everyone who reads a newspaper.
Regarding your quibble about the term ‘domestic demand’, I don’t understand your point? It represents the lion’s share of GDP, it excludes trade, it did grow for the first time in two years.
In terms of the simple Y = C+G+ I + (NX) equation it represents the the important domestic side and I can’t really see how someone can take issue with saying the domestic part of the economy grew.