Morning business news - April 8Monday 08 April 2013 12.01
PORTUGAL FACING MORE TOUGH CUTS - Portugal is facing new austerity cuts, which are being made to offset a ruling in its constitutional court on Friday night. This ruling said that cuts to state pensions and public sector wages were unconstitutional. Portugal's prime minister said the government would have to cut spending on health, education and social security to meet the requirements of the country's €78 billion euro bailout programme. But the new cuts are likely intensify opposition pressure on the government to resign, potentially opening the way to an early general election.
Louise Cooper, of Cooper City in London, says that Portugal is a small country with a population of just 10 million and its problems are being largely ignored by the international markets as it does not pose as big a concern as Spain or Italy. However, nervousness is now being priced into Portuguese debt. Once hailed as the poster child of austerity, Portugal has seen its economy collapse since it was bailed out. Ms Cooper says that its GDP contracted by 1.5% in 2011 and by almost 3.5% last year, while its budget deficit also widened.
BAD WEATHER HIT CONSTRUCTION WORK IN FIRST TWO MONTHS OF 2013 - Planning applications were down by 3% overall in the first two months of this year compared to the same two months last year, according to the National Housing Construction Index. However, the index showed that 11 counties saw an increase in applications, with a of 15% rise in Dublin. Link2plans, which puts the index together, shows that while planning applications were down 3%, there was a 14% fall in commencements, or work actually getting off the ground.
Danny O'Shea, managing director of Link2plans, says that the bad weather seen in January and February may have led to the sharp drop in commencements. Mr O'Shea says that despite the decreases, there is signs of some vibrancy in some sectors of the housing market, especially three bedroomed semi-detached houses in Dublin. He says he believes that the housing market has plateaued at this stage.
MORNING BRIEFS - The Bord Gáis Energy Index - which measures energy costs - went up by 11% last month. Bord Gáis says that March was a turbulent month in the gas market as cold weather, high demand, falling stocks and mechanical faults combined to push wholesale gas prices to record levels. But, Irish domestic customers are protected from short term price fluctuations as the gas used now has been bought over the last number of months, and that limits the exposure to short term spikes in wholesale prices. Irish buyers of UK gas have also benefited from a weakening sterling versus the euro. Since the start of the year, sterling has lost over 4% of its value against the euro.
*** Bank of Ireland says it approved a billion of new loans to small and medium-sized enterprises in the first three months of 2013, an increase of 25% approved in the first three months of 2012. The bank said the increase reflects a pick-up in credit demand from viable Irish SMEs and the bank's initiatives to grow business-banking operations.
*** A story on infant milk formula and China in the Financial Times this morning reports that supermarkets as far apart as the UK and Australia have had to ration sales of formula as demand grows in China for foreign made baby milk. This follows many safety scandals there including the melamine-spiked milk in 2008 which killed six babies and left 300,000 sick. Smuggling rings, buying abroad to supply the Chinese market, have seen the price of formula online hit $32 a tin.