Economics: Irish construction PMI falls to 57.5 in March from 59.2 in February

Builders are warning of a looming skills shortage as new figures show their industry continues to expand on the back of the Republic’s housing squeeze.

The latest Ulster Bank Purchasing Managers’ Index (PMI), published on Monday, shows that house building drove a sharp increase in activity in the sector in March despite disruption caused by heavy snow early in the month.

The index, which follows the sector’s performance on a monthly basis, hit 57.5 in March, indicating a spurt in growth.

The PMI takes 50 as its benchmark. Any reading above that figure indicates that the industry expanded on the previous month, while any result below that indicates that it shrank.

However, March’s reading was down on the 59.2 recorded in February, but this reflected problems caused by the bad weather.

While the entire industry grew, strong growth in house building led the way.

Builders hired more workers in March, with the industry’s job-creating rate reaching a seven-month high.

Monday’s figures showed that both commercial building and civil engineering, which is mostly State-backed large construction projects, also grew in March.

Furthermore, confidence levels among Irish construction firms clearly remain very buoyant as sentiment was little changed from February at levels that are amongst the highest on record.

Over 63% of firms expect activity to increase in the coming 12 months, underpinned by confidence about the prospects for both the wider economy and the construction industry itself.

Economics: Ireland’s seasonally-adjusted trade balance likely to have fallen back in February

Later this morning the Central Statistics Office (CSO) will release Ireland’s official external merchandise trade data for February. With exports breaking above the €12bn level for the first time ever, there was a record seasonally-adjusted surplus of €5,511m posted in January, up €1,742m from the revised positive balance of €3,769m (€3,849m) seen in December. Seasonally-adjusted exports were up 15.7% in the month at an all-time high of €12,331m, while imports recorded a fall of 1.7% to €6,820m.

Meanwhile, on an unadjusted basis there was a surplus of €5,494m in January, also a new high and €1,314m above the surplus of €4,180m posted in the opening month of 2017. The unadjusted value of exports in the first month of the year was €11,925m, €2,021m (20.4%) up on the first month of 2017.

Exports of Organic chemicals increased by €1,153m (85.8%) in the year to €2,497m. Exports of Medical and pharmaceutical products rose by €1,213m (+39.1%) to €4,318m while exports of Electrical machinery, apparatus and appliances fell by €317m (-42.0%) to €437m.

The trade outlook going forward remains clouded in uncertainty due to “Brexit”, but we are still anticipating another solid performance this year. Indeed, we are at this juncture projecting a record surplus, of around €47bn in 2018.

For February we are predicting a seasonally-adjusted surplus of €4,800m.

Economics: Ireland’s budget deficit as % of GDP forecast to have declined further in 2017

Also on Monday, the CSO will release provisional government finance statistics for the fourth quarter of last year and 2017 as a whole.

The government recorded a budget deficit of €3.1bn (-1.4% of GDP) for the first nine months of 2017. This compared with a deficit of €3.4bn (-1.7% of GDP) for the same period of 2016. In the first nine months of 2017, government revenue increased by €1.9bn (3.7%) compared with the same period of 2016.

The main driving factor was a 5.1% increase in taxes and social contributions. Expenditure levels of government increased by €1.6bn (2.9%) when comparing the first nine months of 2017 and 2016. Increases in subsidies and other current transfers were partially offset by a decrease in interest.

General Government Gross Debt stood at €210.7bn (72.1% of annualised GDP) at the end of September, compared with a debt level of €202.4bn (75.1%) for the third quarter of 2016. The fall in the ratio was due to an increase in GDP over the year.

At the end of September, General Government Net Debt was €172.9bn (59.2% of annualised GDP) compared with €174.1bn (64.6%) for the third quarter of 2016. Net debt decreased due to an increase in the assets held by government in the EDP debt instruments.

We are looking for a budget surplus of 3.0% of GDP for Q4, giving an overall deficit of -0.3% for 2017 as a whole, and a debt/GDP ratio at the end of last year of 71.0%.

Alan McQuaid (16/4/18)
Economist