Is Ireland the Poster Child of Growth?
Is Ireland the Poster Child of Growth?
I wanted to familiarize myself with the economic statistics in Ireland, so I thought that I’d share my findings with you all. Many politicians refer to Ireland as the poster child of austerity – according to the contentious thesis of expansionary austerity (a review from the IMF .pdf here), is it therefore the poster child of growth? In this post, I review the cyclical data and find that the Irish economy is quite divergent with optimism only evident in the industrial and export sectors. In aggregate, there’s really been no momentum at all.
On the one hand, the industrial sector seems to be holding in okay, with the manufacturing PMIs remaining above 50 since March 2012. Furthermore, international saving, or the current account, moved from a 6% of GDP deficit in Q3 2008 to a small surplus in the fourth quarter of 2011 (4-qtr moving average). However, the current account has been deteriorating slightly at the margin, beginning in the second half of 2011.
Note: Except where noted in the legend, all charts below relate to the Irish economy.
In contrast, the consumer sector is suffering quite explicitly. After yesterday’s revisions to previous months, we now see the harmonized unemployment hovering near its peak rate, 14.6% in May vs. 14.8% peak (in the chart below, the red line maps the pre-revised unemployment rates). Consumer confidence is very low, which implies that retail sales could tumble a bit in coming months. Furthermore, price inflation lost some steam, although it remains above the deflationary period that ended in 2010 by the headline measure. Core inflation dropped off in the last couple of months to just 0.4% Y/Y in May. Finally, for all of the optimism on Ireland, Q4 2011 GNP and GDP are just 1% and 0.7%, respectively, higher than their 2010 lows.
It’s probably too early to fully discount the orthodox expansionary austerity thesis – but at the minimum, it does appear as if any economic momentum has been gained primarily through global trade, and that sector is struggling. In all, I’d say that Ireland looks more economically depressed than ambitious and not the poster child of growth.
Rebecca Wilder
crossposted with The Wilder View…Economonitors
Rebecca:
Read my friend’s letters from Ireland from a while back. He labels it rather well for what it is.
Anybody who wants to learn what’s what in Ireland’s economy should look up international banker David McWilliams’ book “Follow the Money” and all his other unbelievably entertaining, w/o dumbing down the slightest bit, works.
Examples (copied with Nuance — in case imperfect)
“Deep down, the reason I ended up choosing economics in university was not because I was naturally good at it – I was better at other subjects – but I immersed myself in the cold world of graphs, equations and charts because I wanted to understand how a good man could be diminished by a system. How did this system work? As a boy, I couldn’t figure out how my dad, who was honest and hard-working, meticulous and frugal, could be surplus to the needs of the economy. Who decided this and who made Dad looks so sad when we drove back in the rain from the strange place in town where he had given his friend something? Who were these men in suits from political parties who came on the telly with their grave faces, telling my mom and dad to tighten their belts? Why did my dad turn off the TV every time they came on?”
“Out in our new suburbs, a new generation – the Juggling Generation – is sinking under the weight of huge debts, negative equity and the trauma of failure. They put into the dream that they could juggle all the balls in the air, the new houses, the new jobs and the new children. They believed that the price of houses would continue rising. Why wouldn’t they? Every politician and businessman in the country told them they could only go one way. The media saturated them with seductive images of a brave new world where they could just hop on the Irish bus to success. All you needed was to gather the deposit and you would be whisked away to an advertisers dream world of better stuff, better friends, better conditions, better careers, better sex.”
http://www.amazon.com/Follow-Money-David-McWilliams/dp/0717148076/ref=la_B001HOSBF4_1_1?ie=UTF8&qid=1341519120&sr=1-1
Anybody who wants to learn what’s what in Ireland’s economy should look up international banker David McWilliams’ book “Follow the Money” and all his other unbelievably entertaining, w/o dumbing down the slightest bit, works.
Examples (copied with Nuance — in case imperfect)
“Deep down, the reason I ended up choosing economics in university was not because I was naturally good at it – I was better at other subjects – but I immersed myself in the cold world of graphs, equations and charts because I wanted to understand how a good man could be diminished by a system. How did this system work? As a boy, I couldn’t figure out how my dad, who was honest and hard-working, meticulous and frugal, could be surplus to the needs of the economy. Who decided this and who made Dad looks so sad when we drove back in the rain from the strange place in town where he had given his friend something? Who were these men in suits from political parties who came on the telly with their grave faces, telling my mom and dad to tighten their belts? Why did my dad turn off the TV every time they came on?”
“Out in our new suburbs, a new generation – the Juggling Generation – is sinking under the weight of huge debts, negative equity and the trauma of failure. They put into the dream that they could juggle all the balls in the air, the new houses, the new jobs and the new children. They believed that the price of houses would continue rising. Why wouldn’t they? Every politician and businessman in the country told them they could only go one way. The media saturated them with seductive images of a brave new world where they could just hop on the Irish bus to success. All you needed was to gather the deposit and you would be whisked away to an advertisers dream world of better stuff, better friends, better conditions, better careers, better sex.”
http://www.amazon.com/Follow-Money-David-McWilliams/dp/0717148076/ref=la_B001HOSBF4_1_1?ie=UTF8&qid=1341519120&sr=1-1
Anybody who wants to learn what’s what in Ireland’s economy should look up international banker David McWilliams’ book “Follow the Money” and all his other unbelievably entertaining, w/o dumbing down the slightest bit, works.
Examples (copied with Nuance — in case imperfect):
“Deep down, the reason I ended up choosing economics in university was not because I was naturally good at it – I was better at other subjects – but I immersed myself in the cold world of graphs, equations and charts because I wanted to understand how a good man could be diminished by a system. How did this system work? As a boy, I couldn’t figure out how my dad, who was honest and hard-working, meticulous and frugal, could be surplus to the needs of the economy. Who decided this and who made Dad looks so sad when we drove back in the rain from the strange place in town where he had given his friend something? Who were these men in suits from political parties who came on the telly with their grave faces, telling my mom and dad to tighten their belts? Why did my dad turn off the TV every time they came on?”
“Out in our new suburbs, a new generation – the Juggling Generation – is sinking under the weight of huge debts, negative equity and the trauma of failure. They put into the dream that they could juggle all the balls in the air, the new houses, the new jobs and the new children. They believed that the price of houses would continue rising. Why wouldn’t they? Every politician and businessman in the country told them they could only go one way. The media saturated them with seductive images of a brave new world where they could just hop on the Irish bus to success. All you needed was to gather the deposit and you would be whisked away to an advertisers dream world of better stuff, better friends, better conditions, better careers, better sex.”
http://www.amazon.com/Follow-Money-David-McWilliams/dp/0717148076/ref=la_B001HOSBF4_1_1?ie=UTF8&qid=1341519120&sr=1-1
Anybody who wants to learn what’s what in Ireland’s economy should look up international banker David McWilliam’s book “Follow the Money” and all his other unbelievably entertaining, w/o dumbing down the slightest bit, works.
Examples (copied with Nuance — in case imperfect):
“Deep down, the reason I ended up choosing economics in university was not because I was naturally good at it – I was better at other subjects – but I immersed myself in the cold world of graphs, equations and charts because I wanted to understand how a good man could be diminished by a system. How did this system work? As a boy, I couldn’t figure out how my dad, who was honest and hard-working, meticulous and frugal, could be surplus to the needs of the economy. Who decided this and who made Dad looks so sad when we drove back in the rain from the strange place in town where he had given his friend something? Who were these men in suits from political parties who came on the telly with their grave faces, telling my mom and dad to tighten their belts? Why did my dad turn off the TV every time they came on?”
“Out in our new suburbs, a new generation – the Juggling Generation – is sinking under the weight of huge debts, negative equity and the trauma of failure. They bought into the dream that they could juggle all the balls in the air, the new houses, the new jobs and the new children. They believed that the price of houses would continue rising. Why wouldn’t they? Every politician and businessman in the country told them they could only go one way. The media saturated them with seductive images of a brave new world where they could just hop on the Irish bus to success. All you needed was to gather the deposit and you would be whisked away to an advertisers dream world of better stuff, better friends, better conditions, better careers, better sex.”
http://www.amazon.com/Follow-Money-David-McWilliams/dp/0717148076/ref=la_B001HOSBF4_1_1?ie=UTF8&qid=1341519120&sr=1-1