EXPORTS TO REMAIN RAY OF LIGHT FOR IRISH ECONOMY - A report from Ulster Bank says Budget measures will affect consumer and business spending next year, though stronger exports will help the economy to grow. The bank's latest outlook lowers its 2011 forecast for GDP growth to 1.2%, with GNP - which excludes profits from multi-national companies - expected to edge just 0.1% higher. The bank says that measures to tackle the budget deficit will lead to a fourth consecutive drop in domestic demand in 2011. The bank's report says it will be 2012 before business and consumer spending return to 'very modest' rates of growth.
Ulster Bank economist Simon Barry says that exports remain the strongest part of the Irish economy with growth rates of 10% recorded last year - the strongest performance in a decade. He says the export industry should continue to do well as the latest indications show that the global economic recovery has accelerated. He says that in November, the US had been predicting growth rates of 2.5%, but this has since been revised upwards to more than 3%.
The European Central Bank meets today on interest rates, and while there is no change expected on rates, Mr Barry says that the bank is becoming increasingly uncomfortable with the rising rate of inflation. The bank targets a level of close to but under 2% and the latest figures showed that inflation had risen to 2.4%. He says it is too early for the ECB to give a strong signal on rate rises today, but adds that it is moving towards higher interest rates by the end of the year.
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MORNING BRIEFS - Royal Dutch Shell outshone its troubled rival BP today as it revealed a near-doubling in annual profits to $18.6 billion. Higher oil prices and a boost to production levels meant the Anglo-Dutch firm increased earnings in the final three months of the year by almost 400% to $5.7 billion.
*** Ratings agency Standard and Poor's downgraded Ireland yet again yesterday. Speaking to RTÉ's London editor Brian O'Connell, S&P analyst Frank Gill said the agency is confident that whatever coalition comes into power after the election will commit to the headline fiscal targets that are part of the EU/IMF programme.
*** A survey out this morning shows that activity in the service sector rebounded in January, helped by an improvement in weather conditions and growth in new export orders. The NCB Services Purchasing Managers' Index says that overall, new orders fell last month, but new export orders rose strongly, with particularly strong growth from the UK. Confidence among services firms rose strongly to its highest level since September. Higher fuel costs contributed to an acceleration of growth in input costs, but companies were unable to pass on the higher costs to customers due to intense competition. The prices charged index fell from 43.2 to 42.7.
*** On the currency markets this morning, the euro is trading at $1.3807 cents and 85.23 pence sterling.
