Stockbroker Davy has revised upwards its economic outlook for the year and is now looking at GDP growth of 5%, up from 3.7% previously. That would put the Irish economy on course to be the fastest growing economy in the euro zone for another year.
Conall Mac Coille, chief economist at Davy, said such optimism was warranted given that we have seen extremely strong growth over a range of indicators and very little slowdown in the domestic economy.
"After the Brexit vote, we saw sterling rise to over 90 pence and we saw softness in surveys of the export sector, but since sterling came back to around 85 pence, we've seen exports and manufacturing pick up. The post-Brexit softness has gone away and what we are seeing is catch-up in the economy," he said.
Asked if we were over the worst of the Brexit slowdown for now, Conall MacCoille said the next key date was 2019. "The impact of Brexit so far has been limited to the sterling exchange rate. The issue now is do we get the cliff edge Brexit in 2019 with WTO tariffs? That would hit indigenous manufacturing and agriculture extremely sharply. The question then is will the economy flatline and go into recession?"
Commenting on recent CSO figures showing property prices rising by 10% annually, Mr Mac Coille said there was no sign of a property price bubble forming as of now. "Last year, the average first time buyer borrowed 2.9 times income. From early 2016, the average approval has gone from €180,000 to €205,000. The loan to income and loan to value ratios are moving up, but they're not at the hard limit of the Central Bank rules (3.5 times income) but we will hit them and at some point. We wouldn't want to see 10% house price increases out to 2020. If that did happen, that would be a house price bubble. The Central Bank rules should start to contain increases," he said.
Conall Mac Coille also said he was not overly concerned about the softness in Exchequer returns for the second month running in April. "It's mostly coming from corporate taxes and they're always very lumpy. The key payment dates are June and end year. There's room for things to correct. As far as income taxes are concerned, we know the unemployment rate has fallen to 6.2%. I'd be far more worried if jobs growth slowed and income taxes were surprisingly strong. What we're seeing is that income taxes are weak. That may correct by year end," he concluded.
MORNING BRIEFS - The euro gave up some of the gains it made in Asian trade overnight in response to Emmanuel Macron's victory in the French presidential elections. It topped $1.10 at one point - the highest level the euro has been at against the dollar since the US presidential elections. It later came back below that point, but is slowly creeping back up to that mark. The euro also gained against the pound, but sterling remains below 85 pence to the euro this morning. Any rally was expected to be fairly short-lived anyway as a Macron victory had been largely priced in by market traders since the first round results two weeks ago.
*** Swiss based and Dublin listed food group Aryzta has issued a statement responding to recent share price movements and speculation around its 49% stake in the French food group, Picard. Aryzta does not confirm or deny moves to sell the stake but it says the Board would announce any key developments to the market at the earliest opportunity, consistent with its obligations as a listed company. Aryzta announced earlier this week that it was evaluating alternatives for its holding in Picard. It has also started the process of appointing a new senior executive team.