Evidence is mounting that the economy continues to grow at an extraordinary pace. The latest figures show that retail sales in January this year were 17 per cent up on the same month last year. Much of the increase was due to rising car sales, which were running some 50 per cent ahead of last year's levels. When these are excluded, the figures show an 11 per cent increase in other retail sales on the same month last year. The question of where people are getting the money from was answered, in part, by another set of statistics issued yesterday. The underlying level of borrowing from banks and building societies in February was running some 29 per cent ahead of the same month last year. Mortgage borrowing remains strong - up almost 21 per cent on the previous year - while consumers are obviously also borrowing heavily for other major purchases, such as cars. Businesses are also borrowing to fund investment in expansion programmes.
The figures - together with other recent data - show that the economy continues to fire on all cylinders. Consumer spending and business investment, the two engines of the domestic economy, continue to perform strongly, while export growth remains buoyant. The boom is generating inflationary pressures, but only in some areas of the economy. Property prices continue to rise strongly, for example, as does the price of many services. Petrol and home heating oil prices have also risen strongly, although the agreement this week by OPEC to increase production has led to an easing of oil prices on the international market which should feed through to consumers in the months ahead.
However an interesting aspect of the retail sales figures is that - excluding the car sales - they show almost no inflation in the price of goods in the shops. This appears to reflect tough competition in the market; many retailers are obviously being forced to absorb the impact of the falling euro on import prices in order to stay competitive. It is a demonstration of the forces which affect a small open economy such as the Republic's.
What does this mean for those setting economic policy? The argument that the Budget was overly generous in the tax reductions awarded to the better off is supported by the latest figures. The prospect of a rising pay packet has clearly encouraged many people to borrow and spend; when the higher salaries resulting from the tax cuts appear in people's pockets in the month ahead, this trend will be reinforced.
However Budget policy is a limited influence on the overall economy. The key policy factor behind the boom has been low interest rates - borrowing remains reasonably cheap, despite recent increases in rates. The weakness of the euro, meanwhile, has greatly helped those exporting to markets such as the US and the UK. And the level of interest rates and the performance of the euro both remain completely outside the control of policy-makers here. This does not mean that the Government is powerless. It clearly has major responsibilities in tackling what might be termed the problems of success - congestion, a flood of immigrants and soaring house prices, to name but three. And it must do so in a coherent fashion, recognising that the old policy priorities of maximising economic growth and job creation will, in many cases, no longer apply.