Uncertainty the only certainty in economy right now

Staycations boost spending in July, but manufacturing slides, new figures show

Margaret O’Leary at the door of her shop and home, O’Leary’s (antiques and collectibles) on Main Street in Killarney, Co Kerry. File photograph: Bryan O Brien/The Irish Times

Margaret O’Leary at the door of her shop and home, O’Leary’s (antiques and collectibles) on Main Street in Killarney, Co Kerry. File photograph: Bryan O Brien/The Irish Times

 

The difficulty in getting a fix on the state of the economy, never mind forecasting the future, was highlighted in two pieces of data published in the last 24 hours.

Figures from the Central Bank show how gradual reopening of the economy in July – alongside the ongoing curb on foreign travel – has shaken the shackles off certain sectors.

Spending on accommodation was up by 160 per cent in July as Ireland went staycationing. Restaurants saw a 56 per cent rise in business, with transport spending up 24 per cent and spending on entertainment up 10 per cent.

It’s not that this spending has made up the money lost during the lockdown, but it was taken as an indication of the pent-up demand in the economy as opportunity and confidence re-emerge.

Or maybe not. A survey of the manufacturing sector in August presented an altogether more downbeat assessment of things.

In July, as the sector posted its fastest growth in almost two years, it had been seen as a sign of an energised sector rebounding confidently from Covid lockdown lows.

One short month later, figures out on Tuesday show that fizz has fallen flat, with the fourth largest slump on record in the headline figure. True, at 52.3, it did show the sector still expanding – any figure above 50 points to growth – but it was described as “a loss of momentum” with the finger of blame pointing at the rise in coronavirus case numbers over recent weeks.

Certainly, consumers are hedging their bets. As they have done consistently since lockdown, people are saving more with household deposits showing a net inflow of close to €2 billion.

With the spectre of a second wave of the virus looming and any possible impact it might have on the economy and jobs, uncertainty appears to be the only certainty for now.

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