ENERGY PRICES SET TO RISE - The monthly energy cost index produced by Bord Gáis fell in May from a 31- month high due to a fall in the raw material cost of coal, oil and electricity. However, the index is still 27% higher than a year ago. Underlying that dip in the value of the index is a sell-off in commodities as investors fear recovery momentum in the US economy is not all they had thought. But there is a big sting in the tail - gas prices are expected to go higher during the demand heavy autumn and winter. This is because gas prices tend to lag oil prices by six months so the higher oil prices of more than $100 a barrel we have seen in the first six months of 2011 could result in higher electricity prices. Gas is a key fuel used to produce electricity.
Bord Gáis analyst Michael Kelleher says that despite the May decline in energy prices, the board trend of higher prices continues. He says that after initial falls earlier this month oil prices recovered to trade in a range of $109-117. He says that Irish gas prices are also affected by UK gas prices. Electricity prices are also dictated by wind supply issues and the efficiency of the plants generating power.
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CONSTRUCTION SECTOR CONTINUES TO DECLINE - The latest report on its dire state of the construction sector from the Ulster Bank finds there is a double whammy of falling demand and higher raw materials costs. Chief economist Simon Barry says that May was another month of very weak activity. Declines were broad based and were the worst so far this year. The building industry has contracted every month now for the last four years.
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MORNING BRIEFS - Bank of Ireland looks set to be sued in the High Court in London by up to 2,000 small investors who hold debt in the Bank's UK subsidiary Bristol & West. They are subject to the same haircut as other junior debt holders in Bank of Ireland as part of its €2.7 billion liability management exercise. The investors held permanent interest bearing shares with a coupon of 13.375% issued by Bristol & West prior to its takeover by Bank of Ireland in 1997. If they accept Bank of Ireland's offer, which is underwritten by an instruction of the Government, they stand to get about 20 pence in the pound. If they refuse the bank's offer then they stand to get just one penny per €1,000 invested. Bank of Ireland says it will defend the action.
*** More than half of the 882 smaller companies that responded to an ISME survey on access to credit from the bank said they had been turned down. 54% of them were turned down in the last three months and that compares to 48% turned down in the prior three months. ISME says its members feel banks are once again making it more difficult to access finance despite pronouncements to the contrary.
*** French Finance Minister Christine Lagarde stretched her lead in the race for the IMF's top job on Sunday when Indonesia became the first big developing economy to back her publicly. An 11th-hour challenge from the head of Israel's central bank chief Stanley Fischer announced on Saturday but he is seen as having a difficult task to eclipse Ms Lagarde. Indonesia, like many emerging economies, was previously non-committal about its choice for the next boss of the International Monetary Fund as Southeast Asian capitals discussed whether to put forward a candidate from the region.
*** On the currencies the euro is worth $1.4349 US cents and 88.39 pence sterling.
