The media should help to boost confidence with more balanced reporting
NOT FOR the first time, there’s been good news this week for business and the economy. But don’t expect the media to go into overdrive – it seems only to highlight the bad news, and even spins good news to make it appear bad.
The truth is that Ireland is doing well and the future looks very bright indeed. This week, for instance, a business sentiment survey of 340 companies by KBC Ireland and Chartered Accountants Ireland showed that 22 per cent reported stronger levels of activity in the past three months and that 33 per cent felt more optimistic about the Irish economy, while 29 per cent gave a more negative assessment. This was the first time more firms were upbeat since the survey started in late 2007. Another example – this one facts, not sentiment. On October 7th, Ireland’s second quarter GDP figures (April to June) recorded no fall in our GDP (0.0 per cent), putting us 10th in the EU (ahead of the UK, Holland, Spain, Denmark and also the US).
Why wasn’t this headline news? Why are we only being told the bad news? Why only give airtime to those predicting our demise?
Last month, my own company, Brightwater, asked clients (nearly 28,000 companies ranging from SMEs to large multinationals) a simple question: “When will Ireland get out of recession?” and the results were encouraging. Some 44 per cent said by January 2010, 23 per cent said by July 2010, and 33 per cent said by January 2011.
On October 1st, the Economic and Social Research Institute predicted Ireland would be out of recession by the first quarter of 2011. Davy’s predicted 2010 and NCB predicted 2009. I’ll go with NCB.
On the export front, we have continued to outperform the entire EU. From 2000 to July 2009 our exports grew by 43.9 per cent versus the EU15 average of less than 10 per cent. But what’s even more impressive is that from July 2008 to July 2009 (ie recession time), Ireland’s exports dropped just 2 per cent compared with the EU average drop of 25 per cent.
Our manufacturing and service sectors have massively outperformed our competition. This is seriously great news and should be highlighted. Ireland’s problems are internal and here, the statistics are not good. The nub of the problem is property – which has led to banking problems and beyond.
Confidence has been eroded by all this and by the media's constant negativity. For example, The Irish Timeschose to headline the ESRI's gloomy predictions above Davy's or NCB's more optimistic ones – and that has led people to save, save, save.
Bank of Ireland and Allied Irish Banks are awash with money, but little investment. In 2007 Ireland, the US and UK populations saved about 2 per cent of their annual income. Recessionary fears have led the US and UK populations to save about 5.5 per cent of their income, but Ireland’s people are now saving about 12 per cent of their income. This is too high. There’s no money-go-round – no buying, investment or development. The country has frozen and must be unfrozen. The fear and negativity must stop and the media has an obvious role to play in this.
Another example, close to me and to my firm’s heart, is employment. Let’s be clear: the rate of unemployment has dropped every month from a loss of 31,400 in January, to a gain of 16,500 in September. The media may explain the September fall in unemployment as seasonal, but so was the increase in July and that wasn’t mentioned. Either way, the employment outlook is getting better and better. It is too soon to know if September marks the end of rising unemployment. Most economic forecasters think it will rise a bit more over the winter. But, almost all of them have now revised down their forecasts for peak unemployment next year from about 17.5 per cent to about 13.5 per cent.
The second point is known, but not well publicised it seems to me. It is well reported that in Ireland there are about 430,000 on the live register. We count every person on the register as “unemployed”, so this includes casual workers, people working part time, on maternity leave pay, sick leave pay, disability, now on three day weeks.
This amounts to about 180,000 of the total – leaving about 250,000 as fully unemployed, or 7.3 per cent.
In most other countries, including the US and the UK, they do not count the 180,000. It has been estimated that if the US calculated unemployment in the same way as our live register, the unemployment rate there would be almost 17 per cent.
Gross Domestic Product is another statistic often bandied about and we all know how all the predictions were of Ireland being the worst affected in the EU (some media channels were actually trumpeting that Ireland would record the largest fall in GDP ever recorded).
Frankly, this is rubbish. Predictions of a 12 to 15 per cent fall have been updated recently to 8 to 10 per cent. The truth is still that our GDP has slumped and so the question is why? One reason is property where there is little building going on – and because of our young, home-owning population, the GDP slump is exacerbated. But, of course, when economic growth returns, our GDP growth will also grow disproportionately to everyone else’s.
In Ireland, a remarkable 90 per cent of our GDP comes from exports versus an average 40 per cent for the EU as a whole. Thus, when there is a global crisis, we are hit hard. But equally, when the global economy rebounds, we rebound further and faster.When will we get out of recession? To paraphrase Henry Ford: If we believe we’ll get out of recession next quarter, then we’re probably right; and if we believe we’ll get out of recession in 18 months, then we’re probably right again.
After all, the housing-related problems will eventually go. Sooner or later the global credit crunch will end, mortgages will become more widely available and house prices will stop falling. In the long run, it will be the performance of the manufacturing and service exports that will have a far more decisive effect on the economy than temporary housing-related problems.
Ireland has a dynamic and internationally woven economy that has suffered exponentially as part of a global recession. We also have a young, home-owning population who are not currently buying and finally, we are gripped by a negative media that delights in eye-catching, misleading headlines about the demise of the country.
The media should help boost confidence with more balanced and positive reporting of the economy. For example, if everyone was properly informed about how well our exports have performed in comparison to other EU countries, I think they’d realise that, notwithstanding temporary housing-related problems, the long-term outlook for the economy is fantastic . . . and far better than we’re being told.
David Bloch is chief executive of Brightwater, a firm of recruitment specialists