Monthly Economic Bulletin for December 2004 - Department of Finance

ECONOMIC GROWTH (VOLUME)

According to Central Statistics Office data, the y-o-y increase in GDP at constant (1995) market prices in 2003 was 3.7% while the corresponding increase in GNP was 2.8%. The following table shows growth in GDP and GNP in constant (1995) prices and the corresponding annual values in current market prices.

	GDP (%)	Value (€m)	GNP (%)	Value (€m)
1997-2003 (avg.)	7.6	-	5.8	-
1998	8.9	77,581	7.9	68,030
1999	11.1	89,457	8.7	76,359
2000	9.9	103,065	10.1	88,155
2001	6.0	115,433	3.8	97,107
2002	6.1	127,992	1.5	104,474
2003	3.7	134,786	2.8	111,671

These growth figures represent the average of the expenditure and output estimate of GDP and GNP respectively.

Source: CSO, Quarterly National Accounts released 30 September 2004. Next release for Q3 2004 due not later than 31 December 2004.

Latest estimates of economic growth from the CSO relate to the second quarter of 2004. These preliminary figures indicate that GDP increased by 4.1% year-on-year in Q2 2004, compared to the same period in 2003, while GNP increased by 4.2%.

In the 2005 Budget released on 1^st December 2004 the Department of Finance estimates an increase of 4.9% in GNP and an increase in GDP of 5.3% in 2004.

BUDGET INDICATORS

Exchequer Balance

The 2003 Exchequer Balance showed a deficit of €980 million, which compares with the Budget 2003 target of a deficit of €1,869 million. The Exchequer Balance at end 2004 is now expected to be a deficit of €0.2 billion, i.e. around €2.6 billion lower than originally projected.

General Government Balance

The 2003 outturn for the GGB is a surplus of 0.1% of GDP. It is now anticipated that the 2004 BBG will be a surplus of 0.9% of GDP or $1,348 million.

General Government Receipts and Expenditure (1)

	2002	2003 (Provisional)	2004 (Projected)
	€m	€m	€m
GG Receipts	42,166	45,663	49,179
GG Expenditure	42,462	45,471	47,831
GG Balance	-296	192	1,348
- as a % of GDP	-0.2	0.1	0.9
Financing of GG Balance:
Currency and Deposits	-81	240
Securities other than Shares (excl. derivatives)	412	1642
Short-term	-1,172	-2,999
Long-term	1,584	4,641
Loans	42	-473
Short-term	-34	-158
Long-term	76	-315
Other Movements	-669	-1217
Total	-296	192

An advance release calendar for central and general government - one quarter in advance - is available on the IMF Dissemination Standard Bulletin Board (details below).

General Government Debt

Ireland’s General Government Debt-to-GDP ratio was 32.7% at end-2002. The outturn at end-2003 is estimated to be 32.1% and the forecast for end-2004 is 30.5%.

BALANCE OF PAYMENTS – CURRENT ACCOUNT

	Q1	Q2	Q3	Q4	Total
1999	€63m	-€6m	-€31m	€199m	€226m
2000	-€432m	€505m	-€238m	-€214m	-€379m
2001	-€508m	-€26m	€126m	-€349m	-€757m
2002	-€963m	-€1,135m	€95m	€386m	-€1,617m
2003	-€834m	-€413m	-€190m	-€459m	-€1,896m
2004	-€685m	-€110m

Source: CSO, Balance of International Payments. Released 30 September 2004. Next release for Q3 2004 due not later than 31 December 2004.

There was a deficit of €110 million on the current account of the Balance of Payments in the second quarter of 2004. This compares with a deficit of €413 million in Q2 2003, and €685m in Q1 2004. The improvement in Q2 relative to Q1 was driven by an increased surplus on merchandise trade and a decrease in deficit on services trade, offsetting a marginal increase in deficit on income – in addition current transfers moved from a small deficit in Q1 to a small surplus in Q2. The current account deficit for the year 2003 was €1,896m compared to a deficit of €1,617m for 2002.

EMPLOYMENT

Labour Force Survey / Quarterly National Household Survey

The latest Quarterly National Household Survey (QNHS) of September 2004 indicates that in the twelve months to the quarter March to May 2004:

- Employment increased by 42,800 or 2.4%;

- Unemployment increased by 2,100; the seasonally adjusted unemployment rate increased to 4.6% (4.4% non-seasonally adjusted);

- The labour force increased by 44,800 or 2.4%;

- The number of long term unemployed decreased over the year by 900 – the long term unemployment rate stood at 1.4% in the quarter March to May;

- The seasonally adjusted participation rate was 60.6% in Q2 2004, unchanged from Q1 2004 and up from 60.2% in Q2 2003 (i.e. quarter on quarter and year on year comparison).

The next QNHS results are due to be published on 7^th December 2004.

Live Register

The Live Register figure for October 2004 was 155,476. This is a decrease of 4,990 on the figure for September 2004 and a decrease of 11,076 on the figure for October 2003. The underlying seasonally adjusted figure in October 2004 was 162,100, which represents a decrease of 1,600 on the figure for September 2004.

Building and Construction Employment

Figures in the QNHS indicate that employment in construction rose by 14,600 or 7.6% in the 12 months to the quarter March to May 2004. The CSO’s index of Employment in Construction release indicates that construction employment increased by 5.1% year on year to September 2004.

Other Production

The latest QNHS indicates that employment in production (other than construction) decreased by 5,500 or 1.8% in the twelve months to the quarter March to May 2004. The CSO release of September 2004 on Industrial Employment indicates that industrial employment decreased by 6,300 (2.5%) in the twelve months to June 2004.

Banking, Insurance and Building Societies

Figures in the QNHS indicate that employment in “financial and other business services” increased by 9,900, or 4.4% in the 12 months to the quarter March to May 2004. The latest CSO release of 10^th November 2004 Banking, Insurance and Building Societies: Employment and Earnings indicates that employment in banking, insurance and building societies increased by 1,600 (3.1%) in the twelve months to June 2004.

Public Sector employment

Figures released in the QNHS indicate that employment in public administration and defence decreased by 2,900 or 3.1% in the 12 months to the quarter March to May 2004, and employment in education and health increased by 8,900 or 3.1% over the same period. The latest CSO Statistical Release of 26^th November 2004 on Public Sector Employment and Average Earnings indicates that 243,700 were employed in the public sector (excluding health), an increase of 2,800 (1.2%) in the year to June 2004.

Notified redundancies

The latest figures from the Department of Enterprise, Trade and Employment show that the number of notified redundancies in the first 11 months of 2004 was 22,080 – the comparable figure in Jan-Nov 2003 was 24,840. There were 1,953 notified redundancies in November 2004, a decrease of 16.2% on the corresponding figure for November 2003 (2,331).

FÁS Training and Employment Programmes

At end September 2004, there were 26,156 people in FÁS Employment Schemes (incl. 20,643 on Community Employment). There were a further 11,241 on training programmes/schemes for the unemployed and jobseekers. The corresponding figures for those in FÁS Employment Schemes for September 2003 was 26,394 (incl. 20,329 on Community Employment) and 10,492 were attending the various other training programmes/schemes.

EARNINGS

Industrial Earnings

The latest CSO release shows that average weekly industrial earnings in the year to June 2004 increased by 4.8%, reflecting an increase of 4.6% in the hourly rate and a increase of 0.1% in the number of hours worked, when compared to the same period in 2003. Average weekly industrial earnings in June 2004 were €560.60.

The corresponding average increases for the manufacturing sector were 3.8% (weekly), 3.7% (hourly) and a 0.1% increase in hours worked, with weekly earnings of €531.91

The earnings of all employees in the industrial sector rose by an average of 5% to €656.85 in the year to June 2004. As well as the aforementioned 4.8% increase for Industrial workers, there were increases of 5.1% and 5.4% for Clerical & Managerial employees respectively. (Source: CSO, Industrial Earnings and Hours Worked released 17 September 2004.)

Construction

According to the latest CSO release, average weekly earnings for all workers in the construction sector increased by an average 4.3% to €700.51 in the year to June 2004 - the hourly rate increased by 4.5% while the number of hours worked fell by 0.2%. In the same period, average weekly earnings of skilled operatives increased by an average of 3.3% to €822.08, while for unskilled/semi-skilled workers there was an average increase of 4.6% to €682.85.

Banking, Insurance and Building Societies

The CSO Statistical Release, Banking, Insurance and Building Societies: Employment and Earnings, indicates that average weekly earnings in the banking, insurance and building societies sector increased by 4.0% to €736.26 in the year to June 2004.

Public Sector

The latest CSO figures show that average weekly earnings in the public sector (excluding health) increased by 3.5% to €743.53 in the year to December 2003.

Distribution and Business Services

The latest CSO release indicates that average weekly earnings in the Distribution and Business Services sector increased by 4.6% to €608.69 in the year to March 2004. Average weekly earnings in the Distribution sector increased by 3.5% to €612.81, while those in the Business Services sector increased by 5.1% over the same period to €606.35.

INFLATION AND INTEREST RATES

Inflation

The latest CSO figures, which were published on November 11^th2004, show that the rate of inflation, as measured by the Consumer Price Index (CPI) increased to 2.7% in October, )from 2.5% in September. Excluding mortgage interest rates, the underlying CPI was 2.3%. The CPI excluding tobacco was 2.6%. In August this year, with the publication of the Economic Review and Outlook, the Department forecast an annual average CPI rate of inflation of 2.2% in 2004.

As measured by the EU Harmonised Index of Consumer Prices (HICP), Ireland’s annual inflation rate increased to 2.5% in October, compared to 2.4% in September. Euro area inflation in October measured 2.4 %, compared to 2.1% in September. Eurostat’s ‘flash estimate’ for inflation in the euro area in November is 2.2%.

Manufacturing Output Prices

In October 2004, manufacturing output prices decreased by 0.4% y-o-y. The prices for home sales increased by 0.9% y-o-y, while export sales prices fell by 0.8% y-o-y.

Interest Rates

The EURIBOR one-month interbank rate on 30 November 2004 was 2.17%, up from 2.09% at the end of October, while the EURIBOR three-month interbank interest rate at 30 November 04 was 2.18%, up from 2.15% at end of October.

Ten-year Irish Government bonds (04/2013) traded at the close of 30 November 04 at a yield of 3.60% compared to 3.78% for the equivalent German Government bonds (01/2015). The European Central Bank’s Repo rate at end of November was 2.00%.

House Prices

Department of the Environment, Heritage and Local Government figures show that the average price of new houses nationwide in 2003 rose by 13.4% to €224,567 while the average price of second-hand houses rose by 16.3% to €264,898. In Dublin, average new house prices rose by 13.9% to €291,646 while average second-hand house prices rose by 19.5% to €355,451.

In the latest Department of Environment Housing Statistics Bulletin for the second quarter of 2004 figures show that average new house prices nationwide rose by 10.7% y-o-y to €246,229. This represented a 3.5% increase on quarter 1 2004. Average second-hand house prices rose by 12.7% y-o-y to €301,620. This represented a 10% increase on quarter 1 2004.

In the same period, average new house prices in Dublin increased by 11.6% y-o-y to €322,899. This represented a 3.6% increase on quarter 1 2004. Average second-hand house prices in Dublin increased by 8.8% y-o-y to €399,536. This represented a 10.1% increase on quarter 1 2004.

PERSONAL CONSUMPTION

Retail Sales

Provisional figures for the month of September 2004 (published November 17^th) show that the volume of retail sales increased by 3.1% y-o-y; if Motor Trades are excluded the increase was 2.8%. For the January-September 2004 period the y-o-y increase was 3.0% for All Businesses and 2.8% for All Businesses excluding Motor Trades. The annual increase in Retail Sales volume in 2003 as a whole was 0.9% while the corresponding increase excluding Motor Trades was 1.6%. The volume increase in sales in 2002 was 0.1%, while sales excluding Motor Trades increased by 1.6%.

Car Registrations

Data from the Revenue Commissioners, released on November 9^th2004, indicates that new car registrations in October 2004 were down by 9.6% on the same month in 2003. Meanwhile, registrations of imported used cars were up 56.8% y-o-y in October 2004. Cumulative registrations of new cars in January-October were up 6% year-on-year, while the increase for imported used cars was 54.9%.

OUTPUT AND EXPORTS

Manufacturing Output

Manufacturing output volume decreased by 12% y-o-y in August 2004, and was 2.3% higher in the year to August relative to the same period in 2003. According to CSO data, manufacturing output volume grew by 6.4% in 2003, following an 8.4% increase in 2002.

The CSO provisionally estimates that manufacturing output increased by 5.6% y-o-y in September 2004 and increased by 2.7% in the year to September, relative to Jan-Sept 2003.

Exports

The volume of total exports, including both merchandise and services exports, increased by 5.7% in the first 6 months of 2004, relative to the same period in 2003.

First estimates from the CSO indicate that the value of merchandise exports in the month of September 2004 decreased by 6.6% y-o-y. In January-September 2004 merchandise exports were 3.1% higher in value terms than in the corresponding period in 2003 and in the period January-August 2004:

· Exports of Chemicals products increased by 7.9%

· Exports of Computer equipment decreased by 9.1%

· All other exports increased by 6.7%

· Exports to the UK decreased by 1.3%

· Exports to the US decreased by 0.6%

· Exports to the EU (excluding UK) increased by 8.5%

(Source: CSO, External Trade released 29 November 2004 & CSO Quarterly National Accounts released 30 September 2004).

TOURISM

According to CSO figures, there were 6,369,000 overseas visits to Ireland in 2003, an increase of 5% over 2002. The number of visits abroad by Irish residents was 4,929,000 in 2003, an increase of 6.4% on 2002. Earnings from visitors to Ireland in 2003 amounted to €4,059 million, an increase of 1.8% over 2002. Expenditure by Irish visitors abroad amounted to €4,145 million in 2003, an increase of 4.9% over 2002.

In the first three quarters of 2004, there were 5,147,000 overseas visitors to Ireland, compared with 5,009,000 in the same period in 2003, an increase of 2.8%. The number of visits abroad by Irish residents in the first three quarters 2004 was 4,219,000, an increase of 9.4% when compared with the same period 2003.

AGRICULTURE

Output

The CSO release Output, Input and Income in Agriculture 2003 - Final Estimate released on the 24^th June 2004 indicates that agricultural output at basic prices increased by 3.1% in 2003. This follows a decrease of 3.8% in 2002.

Farm Incomes

The CSO release Output, Input and Income in Agriculture 2003 - Final Estimate released on 24^th June 2004 shows that aggregate farm incomes (i.e. operating surplus) grew by 2.6% in 2003, largely as a result of increases in the value of output for cattle and crops. This follows a decrease in farm incomes of 6.8% in 2002.

OTHER NEWS

Information on Budget 2004 and the Economic Review and Outlook 2004 is available on the Department of Finance website: www.finance.gov.ie

Copies of CSO releases can be downloaded from www.cso.ie

Details of forthcoming statistical releases, including the IMF’s advance calendar can be found at: http://dsbb.imf.org/Applications/web/sddscountrycategorylist/?strcode=IRL

Queries and comments to: Scline Scott, Department of Finance, South Block, Government Buildings, Upper Merrion Street, Dublin 2. Phone (01) 6045857 or

e-mail: scline.scott@finance.gov.ie

(1) rounding may affect totals

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