Brexit is continuing to take its toll here with the latest consumer monitor from the Marketing Institute and the UCD Smurfit Business School indicating that the recovery of the Irish consumer economy has slowed somewhat. But, rather than a big contraction, what we are seeing is more of a slowdown in the growth in confidence.
Mary Lambkin, Professor of Marketing at the UCD Smurfit Business School, said the drop had to be put in the context of what she called the amazing run from 2014 right through to the first half of this year when consumer confidence rose to record levels. She said the softening in confidence here was tracking confidence levels in Britain. "People are watching what's going on. Anything that creates uncertainty creates anxiety."
However, the Professor pointed out that confidence levels were still strong and that it should not be viewed as anything disastrous. "I would be inclined to see this as a blip in confidence that has followed through into spending. Retail growth rates has fallen by half. They were tracking up by 6%. That's now about 3%," Mary Lambkin explained.
But she did say she was slightly surprised at the outcome in the context of the strong employment numbers and the re-emergence of pay increases. "The fundamentals are so strong that spending should have been supported. I was a bit disappointed by the slight fall off, but we have to emphasise that we're not falling off a cliff - things are still in positive territory."
Professor Lambkin pointed out that Irish people were continuing to pay down debt and making great strides. "Irish people have been paying down debt since 2008. It isn't applauded half enough. We've made huge progress in reducing debt from 210% of annual income to 150%. It's still higher than the euro average of 90% of annual income," she concluded.
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MORNING BRIEFS - International healthcare services provider UDG has reported an 8% increase in operating profit to just over €104m euro in its full year results for 2016. Revenue for the year to the end of September was 3% higher at €943m. The company is proposing a 5% increase in final dividend per share giving a full year yield of 11.5 cent.
*** Wall Street's traditional stock indices edged up again last night as the so-called Trump rally continues. Both the S&P500 and the Dow Jones closed at new record highs driven by machinery manufacturers, Deere and Caterpillar which posted better-than-expected quarterly results. Pharmaceutical stocks took a hit, however, after drugs giant Eli Lilly said it would stop developing its Alzheimer drug. There was no particular response to the publication of minutes from the last Federal Reserve meeting which pointed towards the possibility of an interest rate increase. Most expect that the rate rise is going to happen anyway and have factored it in at this stage.
*** The dollar is also continuing to surge on expectation of rate hikes and more growth friendly policies in the US. The dollar is at a 13 year high. Investors are continuing to sell bonds. Donald Trump's promise to unleash a $1 trillion package of tax cuts and infrastructure investments has caused investors to abandon the market and move into stocks and currencies. As governments seek to borrow more money, the interest rate they pay goes up, but the value of the bond falls and investors tend to respond with a sell off.
*** British Chancellor Philip Hammond's Autumn Statement has given the pound a bit of a further boost, consolidating the gains seen in the last week or so. The budget plan prioritised additional spending on high-value investments in infrastructure and innovation. Mr Hammond is going to fund that commitment in the short term through additional borrowing. However, unlike Mr Trump in the US, austerity will continue to rule with sharp adjustments on the way for the day to day spending deficit.
