Investec outlook sees economy stability

Irish Economy Monitor says economic growth will continue to be driven by exports

The CSO’s Residential Property Price Index (RPPI) for April revealed the smallest annual decline since prices turned negative in February 2008. Photo: Frank Miller/The Irish Times

The CSO’s Residential Property Price Index (RPPI) for April revealed the smallest annual decline since prices turned negative in February 2008. Photo: Frank Miller/The Irish Times

Tue, Jun 25, 2013, 08:45

The stabilisation of the domestic segment of the economy is helping to arrest the deteriorating trends in property prices, mortgage arrears and retail sales, Dublin-based stockbroking firm Investec has said.

In its latest Irish Economy Monitor, Investec said flexibility, wage moderation and social cohesion has helped Ireland turn its current account deficit into a current account surplus and get the budget deficit heading in the right direction. It added that domestic demand is set to stabilise this year after several years of contraction.

“The ongoing stabilisation in the domestic economy is helping to offset weakness in a number of key trading partners, thus producing a third successive year of modest growth for the Irish economy in 2013,” Investec chief economist Philip O’Sullivan said.

The monitor said economic growth would continue to be driven by exports, which have had a weak start to the year, some 6 per cent below 2012 levels. However, the rate of decline has improved since the start of the year, with April seeing a return to year on year growth in both exports and the trade surplus.

Mr O’Sullivan said that despite a recent uptick, mortgage drawdowns and house building remain relatively anaemic and will not contribute much to the near term recovery.

The CSO’s Residential Property Price Index (RPPI) for April revealed the smallest annual decline since prices turned negative in February 2008. However, not for the first time the headline figure masks a two-tier performance across the country with a 1per cent year on year rise seen in Dublin and a 2.8 per cent year on year decline seen elsewhere.

The CSO’s RPPI has recorded month on month improvements in 5 of the past 10 months.

The unemployment rate has also shown some signs of stabilisation, with recent Live Register data pointing to an improvement in the unemployment situation. May saw the number of people on the Register decline for a eleventh successive month, with the total now having improved by 5.1 per cent since its peak.

Some 12,700 new jobs created in Ireland in 2012, of which 6,600 were net jobs.