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Economic Update for FTMTA Conference
JimPower Nov 20th
2015
Global Developments• US & UK doing reasonably well• Euro Zone growing well below potential• Emerging markets in some difficulty• Policy will remain very accomodative in Euro Zone, no pressure on interest
rates• QE will remain key policy of ECB• US rates set to rise very gradually, UK cycle less clear• Oil & Commodity prices weak• Euro weakness• Migration crisis highlights lack of policy coherence at EU level• Brexit
USD v EURO
1/2/2
012
2/5/2
012
3/10/2
012
4/13/2
012
5/17/2
012
6/20/2
012
7/24/2
012
8/27/2
012
9/30/2
012
11/3/2
012
12/7/2
012
1/10/2
013
2/13/2
013
3/19/2
013
4/22/2
013
5/26/2
013
6/29/2
013
8/2/2
013
9/5/2
013
10/9/2
013
11/12/2
013
12/16/2
013
1/19/2
014
2/22/2
014
3/28/2
014
5/1/2
014
6/4/2
014
7/8/2
014
8/11/2
014
9/14/2
014
10/18/2
014
11/21/2
014
12/25/2
014
1/28/2
015
3/3/2
015
4/6/2
015
5/10/2
015
6/13/2
015
7/17/2
015
8/20/2
015
9/23/2
015
10/27/2
0150.9
1
1.1
1.2
1.3
1.4
1.5
Sterling v Euro
1/2/2
012
2/5/2
012
3/10/2
012
4/13/2
012
5/17/2
012
6/20/2
012
7/24/2
012
8/27/2
012
9/30/2
012
11/3/2
012
12/7/2
012
1/10/2
013
2/13/2
013
3/19/2
013
4/22/2
013
5/26/2
013
6/29/2
013
8/2/2
013
9/5/2
013
10/9/2
013
11/12/2
013
12/16/2
013
1/19/2
014
2/22/2
014
3/28/2
014
5/1/2
014
6/4/2
014
7/8/2
014
8/11/2
014
9/14/2
014
10/18/2
014
11/21/2
014
12/25/2
014
1/28/2
015
3/3/2
015
4/6/2
015
5/10/2
015
6/13/2
015
7/17/2
015
8/20/2
015
9/23/2
015
10/27/2
0150.6
0.65
0.7
0.75
0.8
0.85
0.9
Ireland-Activity Has Surpassed 2007
1997Q1
1997Q3
1998Q1
1998Q3
1999Q1
1999Q3
2000Q1
2000Q3
2001Q1
2001Q3
2002Q1
2002Q3
2003Q1
2003Q3
2004Q1
2004Q3
2005Q1
2005Q3
2006Q1
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
2015Q10
10,000
20,000
30,000
40,000
50,000
60,000
GDP at Constant (Chain linked annually ref to 2013) Market Prices (Seasonally Adjusted) (Euro Million)GNP at Constant (Chain linked annually ref to 2013) Market Prices (Seasonally Adjusted) (Euro Million)
The Irish Economy in 2015• Compelling economic recovery – more broadly based• Consumer stronger, but price compression still relevant• Strong car sales +30%• Strong merchandise exports +19.3%• Labour market much better• Consumer confidence at 9-year high• Tax Revenues +9.6%• Construction activity improving• Prospects for 2016 positive – but arrogance & complacency
dangerous
Global Commodity Prices Falling
• Oil price falling due to a range of factors but all commodities under pressure
• All Commodities Index -18% YoY• Food -13% YoY• Metals -27% YoY• Oil -42% YoY• Slowing demand in China• Massive over production
UN Food & Agri-Price Index
1/1/2
005
5/1/2
005
9/1/2
005
1/1/2
006
5/1/2
006
9/1/2
006
1/1/2
007
5/1/2
007
9/1/2
007
1/1/2
008
5/1/2
008
9/1/2
008
1/1/2
009
5/1/2
009
9/1/2
009
1/1/2
010
5/1/2
010
9/1/2
010
1/1/2
011
5/1/2
011
9/1/2
011
1/1/2
012
5/1/2
012
9/1/2
012
1/1/2
013
5/1/2
013
9/1/2
013
1/1/2
014
5/1/2
014
9/1/2
014
1/1/2
015
5/1/2
0150
50
100
150
200
250
300
Wheat Price Index
7/12/2
013
7/31/2
013
8/19/2
013
9/7/2
013
9/26/2
013
10/15/2
013
11/3/2
013
11/22/2
013
12/11/2
013
12/30/2
013
1/18/2
014
2/6/2
014
2/25/2
014
3/16/2
014
4/4/2
014
4/23/2
014
5/12/2
014
5/31/2
014
6/19/2
014
7/8/2
014
7/27/2
014
8/15/2
014
9/3/2
014
9/22/2
014
10/11/2
014
10/30/2
014
11/18/2
014
12/7/2
014
12/26/2
014
1/14/2
015
2/2/2
015
2/21/2
015
3/12/2
015
3/31/2
015
4/19/2
015
5/8/2
015
5/27/2
015
6/15/2
015
7/4/2
015
7/23/2
015
8/11/2
015400
450
500
550
600
650
700
750
800
US Milk Price Index
1/1/2
005
5/1/2
005
9/1/2
005
1/1/2
006
5/1/2
006
9/1/2
006
1/1/2
007
5/1/2
007
9/1/2
007
1/1/2
008
5/1/2
008
9/1/2
008
1/1/2
009
5/1/2
009
9/1/2
009
1/1/2
010
5/1/2
010
9/1/2
010
1/1/2
011
5/1/2
011
9/1/2
011
1/1/2
012
5/1/2
012
9/1/2
012
1/1/2
013
5/1/2
013
9/1/2
013
1/1/2
014
5/1/2
014
9/1/2
014
1/1/2
015
5/1/2
0150
5
10
15
20
25
30
The ‘White Gold Rush’ in Trouble
• Fonterra paying <1/2 price 2 years ago• Global Dairy Trade Price Index lowest in 10
years WHY?• Slowdown in Chinese demand• EU quota removal• Russian ban on EU imports• Chinese output increasing dramatically
Some Issues in the Agri Sector
• At global level ‘weird weather’, retail concentration, energy dependency, global population growth
In Ireland:• Consumers want cheap food• Retail concentration• Viewed as a ‘license to print money’ by some• Reality is that it is a competitive, low margin
business that is very vulnerable to imports and retail domination
• Greater price volatility a feature of the future
Ireland – Agri Output & Input Prices
2005 2006 2007 2008 2009 2010 2011 2012 2013 201460
70
80
90
100
110
120
130
140
150
Agricultural output price index Cattle Milk Agricultural input price index
Food Inflation in Ireland
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
120.0
CPI Food Non-Alcoholic
(Jan
2005
=100
)
Mixed Year for Irish Farmers
• Agricultural Output Prices -2.2% YoY (August)• Cereals 0.0 % YoY• Cattle +15.2%• Milk -24.2% YoY• Fertiliser Prices +0.5%• Energy Costs -11.7%• Incomes down circa 5% in 2015?
Telescopic Loaders
2012 2013 2014 2015Jan-Sep0
20
40
60
80
100
120
140
160
180
New Tractor Sales
19891990
19911992
19931994
19951996
19971998
19992000
20012002
20032004
20052006
20072008
20092010
20112012
20132014
2015 Jan-Se
p
0
1000
2000
3000
4000
5000
6000
The Issues
• Farm incomes under pressure• Farming numbers falling – what about number
of dealers?• Move towards higher power tractors• Tight margins• Sterling strength• Recovery in construction could be important
Thank You!
