The first week of the New Year always brings insights into the health of the economy and the potholes ahead.

This year most of the news is positive.

However, in the jargon of economists, there are "downside risks", in other words things could go wrong. Lots of things.


First, the positive developments:

Exchequer Returns showed Ireland reached a new peak in terms of the amount of tax it collected, which reached €47.8 billion.

That means the public finances are healthier. While Finance Minister Michael Noonan hailed this as an achievement, many taxpayers believe they are paying too much.

The Government’s pledge to cut taxes in future depends on the State’s ability to keep spending in check.

The record numbers on hospital trolleys this week illustrates how some of the demands for extra spending are entirely legitimate.

Unemployment has continued to decline. In December of 2014 it was 8.9%, however, by last month it dipped to 7.3%.

That is a huge improvement on the peak of 15% reached during 2011 at the height of the financial crisis.

As the number of people out-of-work declines, it also results in less spending by the State on unemployment benefits. That trend is expected to continue during 2017.

Retail sales have grown steadily. The figures don’t reflect the crucial sales over Christmas but they cover November, when the volume of sales rose by 0.9%. Over the past year sales were up 4.9%, which is a healthy signal.


And now for the caveats:

The IDA, the State body that attracts foreign investment, unveiled its annual report showing a net gain in the numbers working for companies it supported to 11,800.

It said that it had a good pipeline of job projects for the first quarter of 2017. But it issued a very clear warning about the challenges ahead.

Its Chief Executive Martin Shanahan said: “Given market turmoil, Brexit impacts and cost competitiveness pressure, IDA does not expect this trend to continue.”

There are now 200,000 people working for companies supported by the IDA, or 10% of those in employment in the country.

However, the policy of US President-elect Donald Trump is to encourage American companies to create jobs in the States, not in countries such as Ireland.

Mr Shanahan said he expects some US multinationals to stall job projects until the policies of the Trump presidency become clearer.

Mr Trump has been bullying US car companies to switch manufacturing from Mexico to the US with some success. Will he have the same hostility to US tech companies creating jobs in Ireland? 

Perhaps the biggest threat to Ireland’s economic recovery is Brexit.

This week the dramatic departure of Sir Ivan Rogers, the UK ambassador to the EU, highlighted the glaring absence of an agreed negotiating position of the British government ahead of its talks with Brussels in March. That increases the chances of a hard Brexit.

The ESRI and Department of Finance have produced a model of what that might mean for Ireland.

It shows the economy could shrink by almost 4%, average wages would fall by a similar amount and unemployment could rise by about 2%.

So despite the good economic news at the beginning of 2017 there is no room for the Government to be complacent.

Comment via Twitter: @davidmurphyRTE