Saturday, June 12, 2010

Improvement in car sales continues

Following from last month when car sales showed a 100% improvement compared to the same month last year, the relatively strong performance of new car sales compared to last year continued in May.  New car sales were up over 70% on the same month last year.  A graph of the details shown in the table below for the last three months is here.
Car Sales Table May
The cumulative sales of new car to May in 2010 of 59,475 is greater than the total of 57,460 sold over the full 12 months of 2009.  The figures are still far far short of the levels seen in 2007 and 2008, but it is clear we have moved away from the 2009 lows as the red line below shows.
Car Sales Cumulative May

Thursday, June 10, 2010

Core Inflation is unchanged – again!

The CSO have just published the Consumer Price Index for May.  The headline figure is that the overall rate of deflation has eased from –2.1% in April to –1.1% in May.  The suggestion is that the period of deflation may be coming to an end.  We doubted this in April and we continue to doubt it.
This slowing in the rate of deflation is driven almost entirely by two price sectors
  • Energy makes up 7.8% of the index and is up 1.9% on the month.
  • Mortgage Interest makes up 6.7% of the index and is up 6.1% on the month.
The CPI rose 0.6% between April and May, however Energy contributed 0.17% and Mortgage Interest 0.32%.   Energy prices rose largely because the Carbon Tax on Liquid Fuels introduced in last December’s budget came into effect in May.  Mortgage Interest rose as our beleaguered banks have been increasing variable mortgage rates.
Excluding these two categories, the remaining 85% of the index only contributed to a price rise of 0.11%.  On the whole prices were unchanged in May.  This gives us our measure of core inflation.
The rate of core deflation is not easing.
Core Inflation May 10
We can clearly see that overall CPI inflation rate has increased continually since the lows of October 2009.  On the other hand the core inflation rate which excludes the effect of mortgage interest and energy has shown no such improvement.  It was –2.8% in April and only moved to –2.7% in May.

Thursday, June 3, 2010

Exchequer Balance Improves (sort of)

After showing some improvement in April compared to 2009, the Exchequer Balance for May shows shows an even bigger ‘improvement’.  By this time last year, the Exchequer was in the red to the tune of €10.6 billion. Twelve months on and the deficit is ‘only’ €7.9 billion.
Exchequer Balance to May
However this improvement is only technical.  We frontloaded our 2010 contribution to the National Pension Reserve Fund to May 2009 to fund the recapitalisation of AIB and BOI.  This is €3 billion in capital expenditure that accounts for the difference. If this item is spread over the two years, as it would have been, this apparent improvement in the Exchequer Balance disappears.
If we look at the Exchequer Current Account we see that the deficit is actually worse!
Cumulative Current Account Balances to May
By this time last year Current Spending had exceeded Current Revenue by €6.4 billion.  The equivalent deficit this year is €7.2 billion.  The Current Deficit is €800 million or 11% worse this year.  And that is after the measures adopted in last April’s Supplemental Budget and December’s 2010 Budget.
Last May there was a monthly current deficit of €18 million.  This year the monthly deficit was €310 million – an increase of 1,622%.  Most of this deterioration is down to the €319 million fall in monthly tax revenues.  Voted Current Expenditure in May last year was €3,327 million.  This year it was €3,259 million, a reduction of €68 million or 2%.  Not much austerity on view here.
Although expenditure in most areas in down slightly, Social Welfare Expenditure continues to rise.  So far this year the Exchequer has spent about half a billion more on social welfare, than by the same time last year.  This excludes the expenditure on social welfare that is financed by PRSI contributions paid into the Social Insurance Fund.

May Exchequer Returns

The Department of Finance have released the exchequer figures for May.  We were upbeat about the April figures, but that optimism has been quickly quelled.  The relevant documents are
While tax revenues in January and February were almost 18% behind the previous year, the annual drop eased in both March and April.  This improvement stopped in May.  Tax revenue is now 10.4% behind the tax collected to May last year.
Tax Revenues to May
All taxes except CAT are behind last year’s revenues.  Excise duties had been performing well up to April, but Excise revenues in May were 13.3% below the same month last year, and now Excise Duty for the year is almost 3% below the amount collected by the same time last year. 
Tax Revenues to May2
In April we noted that the monthly tax take was up 11.5% on the same month in 2009.  This positive sign has proven to be a once off.  May’s tax revenue of €3.1 billion was over €300 million or nearly 10% below the equivalent from last year.  The good news seen in April has quickly been reversed.
 Monthly Tax Revenues May 2010
Of the eight tax headings the year-on-year comparison to May of last year is negative for seven of the eight headings.  The only tax head showing any improvement is, the now relatively unimportant, Stamp Duty.  This is the reverse of April, when seven of the tax heads were ahead of the April 2009 outturn.  The poor performance of Income Tax, in spite of higher Income Levy rates, is worrying.
Monthly Tax Revenues May 2010a
Performance relative to Department forecasts for May was also poor and revenue for the month was 4.3% below target.  The Department’s forecasts for individual taxes can be seen here.  Tax revenue is now 1.2% behind the Budget forecast as can be seen here.
Monthly Tax Forecasts May 2010
For those who prefer a visual representation of the figures here are some graphs that show the pattern to tax revenues for the past three years.  First, here’s total tax revenue.  The red line showing 2010 tax revenues continues to slip below the green line showing 2009’s dismal tax revenue.
Cumulative Total Tax Revenues
Here are the same graphs for the individual tax headings.
Finally, here is a table that looks at the relative importance of the individual tax headings to total tax revenue.
Tax Contributions
We can see that Income Tax and VAT are becoming an ever greater proportion of total tax revenue making up 75% of 2010 revenue to date.  At the same time in 2006 Income Tax and VAT comprised 63% of total tax revenue.  The importance of Excise Duty has remained relatively constant at around 14% of tax revenues.
Corporation Tax shows a slight decline but the biggest drops can be seen in the property related taxes.  The contribution of Stamp Duty and CGT has fallen from 13% in 2006 to only 3% this year.