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MONTHLY ECONOMIC BULLETIN
5 November 2018
Department of Finance | Monthly Economic Bulletin: October 2018
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The Department’s Monthly Economic Bulletin (MEB) provides a monthly update of some of the key developments within the Irish economy across a broad spectrum of sectors. The bulletin also outlines fiscal developments for the State, as well as being a source of the Department’s most up-to-date forecasts and providing a snapshot of conditions in some of Ireland’s key trading partners. The publication is designed with the aim of being both informative and accessible to a wide readership. The MEB can be used as a research aid or for presentational purposes and is also available online at the Department’s website at www.finance.gov.ie
Table of Contents The Economy ................................................................................................................................................................ 2
Economic Growth ..................................................................................................................................................... 2
International Developments ..................................................................................................................................... 3
External Trade ........................................................................................................................................................... 4
Personal Consumption ............................................................................................................................................. 5
Inflation..................................................................................................................................................................... 5
Labour Market .............................................................................................................................................................. 6
Employment ............................................................................................................................................................. 6
Earnings .................................................................................................................................................................... 7
Sectoral Developments ................................................................................................................................................. 8
Housing ..................................................................................................................................................................... 8
Tourism ..................................................................................................................................................................... 8
Public Finances ............................................................................................................................................................. 9
Exchequer Balance.................................................................................................................................................... 9
General Government Balance .................................................................................................................................. 9
Other News ................................................................................................................................................................. 10
Department of Finance | Monthly Economic Bulletin: October 2018
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The Economy Economic Growth Macroeconomic outturn for 2017
Real GDP rose by 7.2 per cent in 2017. GNP rose by 4.4 per cent.
GNI* is estimated at €181.2 billion in 2017 (GDP is €294.1 billion). As a result, the debt to GNI* ratio was 111.1 per cent in 2017 (compared to a debt to GDP ratio of 68.4 per cent in 2017).
Modified Final Domestic Demand– that is domestic demand excluding the volatile components of investment spending - made a solid positive contribution to growth in 2017 increasing by 3.2 per cent on an annual basis.
Net exports were the main driver of growth in 2017, reflecting a significant increase in exports of 7.8 per cent and a substantial decline in imports of 9.4 per cent over the year. The latter is primarily due to a contraction in imports linked to the onshoring of intellectual property assets.
Macroeconomic outturn for Q2 2018
In the second quarter of this year, the level of GDP rose by 2.5 per cent relative to the previous quarter (on a seasonally adjusted basis). As a result, the level of GDP was 9.0 per cent higher year-on-year.
Personal consumption (+4.4 per cent) and exports (+11.3 per cent) recorded strong annual growth while investment (-32.0 per cent) and imports (-6.0 per cent) declined significantly due to a fall in the onshoring of intellectual property.
(year-on-year % changes) 2016 2017 2018
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017
Personal Consumption 2.9 3.1 -0.3 1.0 3.1 2.8 2.9 4.4 4.0 1.6 Government Consumption
4.7 3.4 3.3 3.5 4.1 4.9 3.6 4.2 3.5 3.9
Gross Investment 58.8 31.6 -22.4 -8.7 -46.0 -43.0 -1.0 -32.0 51.7 -31.0
Exports 2.0 2.7 3.0 4.4 8.6 14.5 6.2 11.3 4.4 7.8 Imports 16.7 7.9 -9.3 -3.1 -14.7 -10.5 -1.4 -6.0 18.5 -9.4 GDP 1.4 12.7 2.9 6.2 13.2 6.5 9.3 9.0 5.0 7.2 GNP 8.5 21.1 -1.1 0.0 16.0 3.0 9.1 11.9 11.5 4.4
Source CSO
Latest Economic Forecasts
The Department of Finance published its most recent macroeconomic forecasts on Oct 9th as part of Budget 2019. These forecasts along with those of other forecasting institutions are outlined in the table to the right.
GDP Forecasts Date 2018 2019
European Commission July 2018 5.6 4.0
Department of Finance Oct 2018 7.5 4.2
Central Bank of Ireland Oct 2018 6.7 4.8
IMF Oct 2018 4.7 4.0
ESRI Sept 2018 8.9 4.5
OECD Sept 2018 4.0 2.9
Department of Finance | Monthly Economic Bulletin: October 2018
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International Developments
The United States
The US economy expanded by 0.9% in Q3 2018 q-o-q and increased by 3.5% y-o-y.
Annual inflation was 2.3% in September, down from 2.7% in August. Core inflation was up 0.1% on the month
(sa) and up 2.2% y-o-y.
US non-farm payroll data showed the US economy gaining 250,000 jobs in the month of October (sa), with the
unemployment rate unchanged at 3.7% in October.
The manufacturing PMI increased to 55.7 in October and the services PMI increased to 54.7 in October (above
50 indicates expansion).
The euro area
The euro area economy expanded by 0.2% in Q3 2018 q-o-q and increased by 1.7% y-o-y (sa).
Annual inflation in the euro area decreased increased from 2.1% in September to 2.2% in October. Core
inflation was 1.3% in October, up from 1.1% in September.
The unemployment rate in the euro area was 8.1% in September (sa), unchanged from August, and down from
8.9% rate recorded in September 2017.
The manufacturing PMI decreased to 52.0 in October and the services PMI decreased to 53.3 in October (above
50 indicates expansion).
Exchange Rate Developments
The €/£ spot rate was 0.88 in October, down from 0.89 in Sep, and down from 0.89 October 2017. The €/$
spot rate was 1.15 in October, down from 1.17 in September, and down from 1.18 in October 2017.
Brent crude oil was $80.5 in October, up from $79.1 in September and from $57.6 a year earlier.
.
The United Kingdom
The UK economy expanded by 0.7% in the three months to
August.
Annual HICP inflation was 2.4% in September 2018, down from
2.7% in August 2018. Core inflation was 2.0% in September, down
from 2.2% in August.
Employment was unchanged in the 3 month period to August
2018 compared with March to May 2018 but increased by 289,000
y-o-y.
The unemployment rate was 4.0% in the three month period June
to August, down from 4.3% in the same period last year.
The manufacturing PMI decreased to 51.1 in October and the
services PMI decreased to 52.2 in October.
Department of Finance | Monthly Economic Bulletin: October 2018
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External Trade External Trade and Industrial Production
On a monthly basis, merchandise exports decreased by 3.1% (sa) in value terms in August. Merchandise imports decreased by 1.8% (sa) in value terms. As a result, the trade surplus decreased by 5.8% to €3,696 million compared with July 2018.
On a monthly basis, industrial output increased by 7.9% (sa) in August m-o-m and increased by 13.3% y-o-y.
Output in the modern sector increased by 1.4% in August and output in the traditional sector increased by 2.2% in the month.
PMI Data1
The Manufacturing PMI had a reading of 54.9 in
October, down from the previous month’s 56.3
(above 50 indicates an expansion). The rate of
expansion in the Services PMI increased to 58.7 in
September, from 58.0 in August.
Balance of Payments – Current Account
In Q2 2018, a current account surplus of 13.3 per cent of GDP was recorded2.
A merchandise trade surplus of €29.0 billion was recorded in Q2 2018.
The services trade deficit improved from €9.6 billion to €2.0 billon over the year to Q2 2018.
1 Source: Services and Manufacturing PMI published by Investec. Note: PMI measures qualitative rather than quantitative responses from purchasing executives related to their
expected output and may therefore not mirror trends in output. 2 This headline figure is heavily distorted by the multinational sector in Ireland through inter alia contract manufacturing, aircraft leasing and re-domiciled PLC’s.
Department of Finance | Monthly Economic Bulletin: October 2018
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Personal Consumption Headline retail sales, in volume terms, decreased by
1.5% month-on-month (sa) in September and
increased by 6.5% in year-on-year terms.
Excluding Motor Trades, the volume of ‘core’ sales
increased by 2.8% (sa) in September month-on-
month and increased by 6.3% year-on-year.
New private cars licensed for the first time decreased
by 4.7% in the period January-September 2018 y-o-y.
Used (imported) private cars increased by 9.2% over
the same period. As a result, total private cars i.e. new
and used (imported), increased by 0.3% in the period
January – September 2018 y-o-y.
The Consumer Sentiment Index decreased to 93.5 in
October 2018, down from 96.4 in September 2018.
Inflation Consumer Price Index (CPI)3
On a HICP4 (Harmonised Index of Consumer Prices)
basis, prices in Ireland increased by 0.3% between
August and September 2018, and increased by 1.2% on
a year-on-year basis.
The Consumer Price Index (CPI) increased by 0.4% on
the month and increased by 0.9% in year-on-year terms
in September 2018.
The main sectors impacting on the CPI index over the
month were increases in Clothing & Footwear
(+0.13%) and Housing, Water, Electricity, Gas & Other
Fuels (+0.06%). The largest downward contribution
were Transport (-0.37%) and Restaurants & Hotels (-
0.12%)
3 Source: Consumer Price Index, as published by the CSO. 4 The HICP measure of inflation excludes certain items that are included in the CPI; the most notable of these is mortgage interest and some insurance items. HICP is used for comparison between EU member states.
Department of Finance | Monthly Economic Bulletin: October 2018
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Labour Market Employment The seasonally adjusted unemployment rate for October 2018 was 5.3%, down from 5.4% in September and down
from 6.6% in October 2017. October shows a (sa) decrease of 1,700 people on the Live Register on the month and
a fall of 37,245 year-on-year.
Second quarter 2018 Labour Force Survey (LFS)
The CSO published the LFS for Q2 2018 on 28th August 2018.
Key points from the Q2 2018 release were:
The level of unemployment decreased by 16,200 in
the year to Q2 2018 (-10.1%) and the seasonally
adjusted unemployment rate in Q2 fell to 5.8% from
6.7% in Q2 2017.
There were 2.26 million people in employment in Q2
representing a 3.4% annual increase (74,100).
In seasonally-adjusted terms, employment increased
by 0.8% (17,200) over the previous quarter.
The labour force increased by 57,900 over the year to
Q2 2018 (2.5%).
The long-term unemployment rate decreased from 3.2% to 2.0% over the year to Q2 2018, with those long-
term unemployed now accounting for 33.9% of total unemployment.
The youth unemployment rate decreased from 16.1% to 15.4% over the year to Q2 2018.
Latest Labour Market Developments
Employment Labour Force
ILO Unemp. Rate (sa)
ILO Participation Rate (sa)
Actual Y-o-Y % Y-o-Y % Overall LT Overall
Q2 2017 2,180,900 54,200 2.5 3,200 0.1 6.7 3.2 61.7 Q3 2017 2,206,500 48,500 2.2 10,900 0.5 6.6 2.7 61.9 Q4 2017 2,230,800 67,300 3.1 43,700 1.9 6.4 2.5 62.2 Q1 2018 2,220,700 62,300 2.9 31,900 1.4 5.9 2.1 62.1 Q2 2018 2,255,000 74,100 3.4 57,900 2.5 5.8 2.0 62.2
Source: CSO
Focusing on sectoral developments, employment rose in ten of the fourteen sectors over the year to Q2 2018.
The largest increases were in the Construction (+13.9%) and the Accommodation and food services (+10.8%)
sectors.
Employment Change by broad economic sector (% yoy)
2016 2017 2018
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Services 3.1 3.1 3.2 2.8 2.3 2.8 2.9 3.7 Industry (inc construction) 7.2 6.4 6.8 3.6 3.3 4.4 2.4 3.3 Agriculture 3.0 3.5 -0.4 -3.9 -4.1 1.6 5.2 -4.0 Total 3.8 3.7 3.7 2.5 2.2 3.1 2.9 3.4
Department of Finance | Monthly Economic Bulletin: October 2018
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Earnings The CSO published Earnings and Labour Costs data for the second quarter of 2018 on the 29th August 2018. The
release covers employees in all sectors with the exception of agriculture, fishing and forestry. The key points from
the release are:
Average weekly earnings increased by 3.3%
y-o-y to €744.08 in Q2 2018 from €720.52 in
Q2 2017.
The average number of hours worked per
week was 32.5 hours in Q2 2018, down from
31.8 in Q1 2018.
Average hourly earnings increased by 2.8%
y-o-y to €22.89.
Average weekly earnings in the public sector
were €959.09 in Q2 2018 compared with
€683.12 in the private sector.
Average hourly earnings increased by 2.1% in the year to Q2 2018 in the public sector, while hourly earnings
in the private sector increased by 3.1% over the same period.
Weekly earnings in the private sector were up 3.6% over the year to Q2 2018 and up 2.4% in the public sector.
Sectoral Developments
Across the economic sectors average weekly earnings increased in all of the 13 sectors in the year to Q2 2018.
The sectors with the largest increases were the financial, insurance, and real estate sector (6.5 per cent),
followed by the Professional, scientific and technical sector (6.3 per cent) and Information and communication
(5.5 per cent) sectors.
Annual Change in Average Hourly Earnings (%)
Source: CSO
2016 2017 2018 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Industry 0.0 1.5 1.8 0.2 3.2 2.3 1.8 3.0 Construction 0.7 0.6 2.1 -0.3 2.6 1.2 2.0 4.1 Wholesale/Retail: motor vehicle repair 1.8 4.2 1.7 1.9 2.0 1.6 2.1 2.3 Accommodation & Food Services 3.0 1.7 2.4 1.8 1.0 2.4 5.4 2.1 Financial, Insurance & Real Estate 1.2 0.1 2.6 3.9 3.6 3.6 4.9 5.8 Total 0.3 1.2 0.6 1.4 2.8 1.9 3.1 2.8
Department of Finance | Monthly Economic Bulletin: October 2018
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Sectoral Developments Housing In September, the number of Mortgages
approved for house purchases declined by
2.2% (y-o-y) while the value of Mortgage
approvals decreased by 1.2% (y-o-y).
Residential property prices nationally
increased by 8.6% in August, on a year-on-
year basis, following on from an increase of
10.0% in July. Prices increased by 0.3%
nationwide over the month.
Dublin residential property prices increased
by 0.2% over the month and increased by
6.1% on a year-on-year basis; properties
outside of Dublin increased by 0.4% in
August and are up 11.4% year-on-year.
There were 4,419, new dwelling completions in Q2 20185, increasing 34.1% compared to the same period
in 2017. There were 14,435 new dwelling completions in 2017 compared to 9,907 in 2016.
The Ulster Bank Construction PMI – an index tracking changes in construction activity posted 56.2 in
September, down from 58.3 in August (above 50 equates to expansion)
Tourism There were 8,203,500 overseas visits to
Ireland in January to September 2018, an
increase of 7.1% y-o-y.
The number of overseas trips made by Irish
residents during the same period increased
by 3.8% y-o-y to 6,418,200.
In September 2018, the CSO published the
Tourism and Travel Q2 2018 release, which
revealed:
Total tourism and travel earnings from
overseas travellers to Ireland increased by
5.0% between Q2 2017 and Q2 2018, from
€1,876 million to €1,970 million.
Total tourism and travel expenditure by Irish
residents overseas increased by 10.0%
between Q2 2017 and Q2 2018, from
€1,664 million to €1,831 million.
5 The CSO’s quarterly new dwelling completions series replaced the Department of Housing, Community and Local Governments housing ESB connections series on the 14th June 2018.
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Great Britain Other Europe USA andCanada
Other Areas
Trips to Ireland by Area of Residence
Jan - Sept 2016
Jan - Sept 2017
Jan - Sept 2018
Department of Finance | Monthly Economic Bulletin: October 2018
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Public Finances Exchequer Balance
An Exchequer deficit of €2,694 million was recorded to end-Ocotber 2018. This compares to a surplus of €326 million in the same period last year. The year-on-year dis-improvement in the Exchequer balance is primarily down to the flattering effect on last year’s deficit of the 2017 AIB share sale receipts (worth €3,434 million to the Exchequer).
Tax revenues of €42,163 million were collected to end-October 2018, an annual increase of 6.8% or €2,693 million on end-October 2017. This was slightly ahead of profile, up by 1.4% or €594 million.
Total net voted expenditure to end-October 2018, at €40,142 million, was (0.4%) or €168 million below profile, but up €3,376 million (9.2%) in year-on-year terms.
Combined non-tax revenue and capital receipts of €3,661 million were down 46.4% (€3,174 million) year-on-year, due to the base effect of last year’s AIB share sale of €3,434 million.
General Government Receipts and Expenditure7
2017 2018 Forecast 2019 Forecast €m €m €m
GG Receipts 76,545 80,830 85,235 GG Expenditure 77,275 81,145 85,310 GG Balance -730 -315 -75 GGB (% of GDP) -0.2% -0.1% 0.0% GG Debt (% of GDP) 68.4 64.0 61.4
Structural Balance (% of GDP) 0.4% -1.0% -0.7% Source: Department of Finance Budget 2019.
6 The general government balance (GGB) measures not just the difference between receipts and expenditure of central government [the Exchequer] but the fiscal performance of all arms of Government (other than commercial state-sponsored bodies), including local government and non-commercial state-sponsored bodies, as well as extra-budgetary funds such as the Social Insurance Fund and the Ireland Strategic Investment Fund. It is therefore a wider measure of the public finances than the Exchequer Balance (EB). The GGB operates on an accruals basis whereas the Exchequer Balance is a cash-based measure. 7 Figures for GG receipts and expenditure are calculated in accordance with European standard statistical accounting rules (ESA 2010). The GGB is based on the April 2018 EDP return.
General Government Balance The headline General Government Deficit for 2017 was €0.7
billion or 0.2% of GDP.6
The headline General Government Deficit is forecast to remain at 0.1% of GDP for 2018 and fall to 0.0% for 2019.
The central fiscal assumption in Budget 2019 is that Ireland will have a balanced budget in 2019. This is defined as achieving our Medium Term Budgetary Objective (MTO) – a structural deficit of -0.5% of GDP.
Budget 2019 currently forecasts that Ireland will broadly
achieve its MTO in 2019.
Department of Finance | Monthly Economic Bulletin: October 2018
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Other News
The Department’s Budget 2019 booklet is available on the Department’s website: http://budget.gov.ie/Budgets/2019/2019.aspx
Electronic copy of Stability Programme Update 2018 can be accessed here:
http://www.finance.gov.ie/wp-content/uploads/2018/04/20180417-SPU-2018-for-website.pdf
Electronic copy of Summer Economic Statement 2018 can be accessed here: https://www.finance.gov.ie/wp-content/uploads/2018/06/20180622-SES-2018.pdf
An electronic copy of the National Reform Programme is available on the Department of the Taoiseach’s website: www.taoiseach.gov.ie
Copies of CSO releases can be downloaded from www.cso.ie Information on Central Bank statistical releases can be downloaded from: http://www.centralbank.ie
Details of forthcoming statistical releases, including the IMF’s advance calendar can be found at:
http://www.imf.org/external/NP/SEC/bc/eng/index.aspx
Details of the Commission’s Summer 2018 forecast can be found at: https://ec.europa.eu/info/sites/info/files/economy-finance/ip084_en.pdf
Details of the ESRI’s Quarterly Economic Update forecast can be found at: http://www.esri.ie/publications/quarterly-economic-commentary-autumn-2018/
QUERIES ON THIS PUBLICATION TO: GENERAL QUERIES AND COMMENTS TO:
Michael Flanagan Press Office
Department of Finance Department of Finance
Upper Merrion Street Upper Merrion Street
Dublin 2. Dublin 2.
Phone (076) 100 7604 or e-mail: Phone (01) 6760336 or e-mail:
Department of Finance | Monthly Economic Bulletin: October 2018
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Department of Finance’s Budget 2019 Forecasts
Source: CSO, Department of Finance
Annex
2018 2019 2020 2021 2022 2023
Economic Output (% change)
Real GNP 5.9 3.9 3.3 2.3 2.4 2.5
Real GDP 7.5 4.2 3.6 2.5 2.6 2.7
Nominal GDP 9.3 6.2 5.4 4.4 4.4 4.5
Components of GDP
Personal Consumption 3.5 3.0 2.6 2.1 2.2 2.4
Government
Consumption 3.5 2.9 1.9 1.8 1.8 1.8
Investment -8.9 7.1 5.7 4.4 4.3 4.3
Exports 7.0 5.6 4.8 3.8 3.7 3.6
Imports 0.9 6.2 5.3 4.5 4.3 4.1
External Balance
Current A/C (% of GDP) 12.0 11.7 11.5 10.9 10.5 10.0
Price Developments
HICP 0.7 1.5 1.7 2.9 2.4 2.6
Department of Finance | Monthly Economic Bulletin: October 2018
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