Evening Echo Article 29/08/11

I wrote an article last week that was carried by Monday’s Evening Echo.  The goal was to highlight some positive elements of the current economic situation.  I must have been in a very good mood as I took this ball and ran with it.  Some revised numbers have been released since this was written but, in the main, it holds up.

Reasons to be cheerful parts one, two and three

The Irish economy has taken a battering over the past four years.  The unemployment rate has risen to 14%, the banking system collapsed with the crash in the property market and a €20 billion hole opened in the public finances. 

These are all problems that will not be resolved easily.  However after four years where the news was unrelentingly negative, we have had occasion recently where some positive economic developments leaked into news cycle.  Here are nine that are worth recounting.

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Retail Sales; Tourist Numbers

The release of the July Retail Sales Index shows a slight rise in retail sales.  Core retail sales (excluding motor trades which make up 21.6% of the July index) rose by by both value and volume when compared to June.

The monthly rise is not suggesting that the decline in retail sales is over and the annual changes for both the value and volume series remained negative as has been the case for over a year now.

The monthly changes show the volatility that highlight that a monthly swing is not to be considered a change in the long run momentum of the series.

One factor related to sales in Ireland (and not confined to retail sales) is the number of visitors from abroad.  An increase in visitors should lead to an increase in consumption. 

The CSO’s Overseas Travel release shows that in the first six months of 2011 there were 3.0 million visitors from abroad compared to 2.6 million in 2010 – an increase of 13%.

Separate data in Table 13 from the CSO’s National Income and Expenditure Accounts show that non-residents spent €3.1 billion in the economy in 2010.  If the 13% increase in numbers is maintained for the year and corresponds to a similar increase in expenditure by non-residents then consumption in this category will rise to around €3.5 billion.

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Mortgage Arrears Data

The Financial Regulator has just released the June 2011 update of the Mortgage Arrears Statistics.  The headline figures will get plenty of attention.  Here are some related points.

The number of owner-occupied mortgages in Ireland is now 777,321 and the total balance outstanding on them is €115 billion.  This is down from 782,429 mortgages owing €116 billion in the March release. 

Additional data from the Irish Banking Federation show that around €350 million new mortgage lending was provided to first-time buyers and for top-ups in the March to June period.  Lending to mover-purchasers and for remortgages may mean new lending could be even higher.

The €870 million in the outstanding amount and the €350 million in new lending means that around €1.2 billion of capital repayments were made in the quarter.  The data may be about mortgage arrears but it also shows that substantial mortgage repayments are also being made.

The average balance on all mortgages in Ireland is €148,000.  The average balance of mortgages in arrears is €194,000.

The 55,763 mortgages in arrears have €947 million in arrears owing or nearly €17,000 per mortgage.  For the 40,000 mortgages more than 180 days in arrears the average is €21,500 per mortgage.  Twelve months previously there were 24,000 mortgages in this category with average arrears of €19,500.

There were 6,154 households who moved into mortgage arrears in the second quarter. In the same period around 5,500 households became mortgage free.

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Ouch!

Here are two paragraphs extracted from from a New York Times article on possible Republic Presidential nominee Michelle Bachmann.

Bachmann Promises Fast Economic Turnaround With Tax Cuts

Sketching her prescriptions for the economy, Mrs. Bachmann often tells voters that she was one of only a few House Republicans to oppose the debt ceiling agreement this summer. And she draws applause by promising to close the “job-killing” Environmental Protection Agency.

But on Saturday she ventured into less familiar territory, pointing to the example of Ireland: “There are over 600 American companies that have gone to Ireland because of the tax rate,” she said. “Over 100,000 jobs. I want those 100,000 jobs back in the United States.”

HT: Mark Little

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Onwards and downwards

As predicted by Cathal in the comments the Irish ten-year bond yield as calculated by Bloomberg has indeed dropped below 9% this week.

This has been a remarkable performance.  It would have been reasonable to expect the surge in the yield in the run up to the EU summit to be reversed.  However, a drop from 14% to 11% would have been enough to achieve that.  Instead the yields have continued onward and downward and are now at 8.8%.

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