Hopes of economic recovery limited
While Ireland’s economy remains stagnant, Europe is showing some signs of life
As we pass the half-way point in the year, how has our economy performed in the first six months of 2013 and what are its prospects for the remainder of the year?
Last week’s final data release for the first quarter of 2013 came with the publication of the national accounts figures, which provide the widest ranging measures of economic activity, including gross domestic product, domestic demand and aggregate exports of goods and services.
The figures were awful, both domestically and on the export side. GDP, the revised 2012 data showed, contracted for three quarters on the trot from the middle of last year.
The grim news contained in these figures was mitigated partly by the quarterly jobs data, which are as important, if not more so, in gauging the overall state of the economy. In the first quarter of the year, the numbers at work in the economy grew, on a seasonally adjusted basis, for the third consecutive quarter.
With GDP contracting at the same time as employment is growing, what is going on?
The national accounts and jobs data have been moving in different directions for some time in the UK, raising issues about whether the GDP figures are really capturing what is going on in the economy.
Here, where other indicators in the first quarter, including retails sales and (separate) goods exports figures, were also weak, the divergence is likely to be explained by the jobs data lagging economic activity figures. Thus, the likelihood is that a renewed downturn in the labour market can be expected in the second half of 2013 if activity does not bounce back soon.
A more stable second quarter
The second quarter of the year looks to have been better than the first, from what can be gleaned from the more limited, but more up-to-date numbers available.
The most encouraging of the more timely information is – again – employment-related. On Wednesday, the live register, which counts the numbers in receipt of unemployment benefit, was published. In June the numbers on welfare fell yet again.
Although these figures don’t measure employment, the statisticians include an estimate of the unemployment rate derived from the length of dole queues. Having remained stable at 13.7 per cent from February to May, the jobless rate inched down to 13.6 per cent last month, its lowest in three years. If nothing else, it shows that the labour market to mid-year has not yet been affected by wider weakness in the real economy.
Tuesday’s tax returns are also bang up to date, with a full set of figures for the second quarter. Although they are volatile, they show year on year growth rates accelerating in each month of the second quarter.
Less timely data, up to May, include retail sales figures and property prices. The former showed the first uptick in months, while the latter registered its second consecutive monthly increase, providing yet more evidence that the year-long period of broad stability in residential property prices is a market floor.
Even less timely goods export data – for April – are the final piece in the jigsaw. From a three year monthly low in December, the value of goods exports picked up gradually to a 2013 high point by April, even if that high point was still below the monthly average for 2012, reflecting the general weakness in the export sector this year.
Putting all the pieces together, there is no real reason to believe that a solid recovery is underway at this point. But nor are there signs that the economy is on the slide again.