Claims that the Recession is (almost) over!

So believes Davy Economist, Rossa White, in an article in last Friday’s Irish Times.

THE IRISH recession is almost over. That statement may shock some readers as much as the mind-boggling billions needed to fill the crater in our banking system. Yet amid the clamour over the damage wreaked by reckless lending in the past, the recent stabilisation in the economy has received little attention.

Three reasons account for the blind-spot about that improvement: lagging statistics; widespread focus on the wrong metrics; and “feel” versus concrete evidence. First, data on the economy as a whole – National Accounts – are only produced once a quarter. Even then, the figures are way out-of-date, being released almost three months following the end of the reference period ie first-quarter numbers will be available in late June. It is far too late to wait until then to find out what has happened in the economy. As a consequence, many real-time (or virtually real-time) indicators are produced. The latest evidence from those indices for the month of March – the PMI surveys, Live Register and consumer confidence – suggest that the economy is bottoming.

White turns to three measures to provide evidence of an end of the recession:

• NCB’s Purchasing Managers Index and graph from here and on RTE
• The CSO’s Live Register and graph and on RTE
• KBC’s Consumer Sentiment Index and graph and on RTE

The Purchasing Managers Index and Consumer Sentiment Index are not ‘real’ in the sense that they are based on surveys of opinions rather than actual data, but they are likely to be strongly related to actual outcome as claimed by Markit Economics for the PMIs.  The only source cited by White based on real data is the Live Register and while there was reduction of 2,300 in February the Live Register showed a disimprovement in March with a seasonally adjusted increase of 600 ‘signing on’.

That is not to say that there is no good news on the economy.  In fact over the past week or so we have identified so positive trends, including:

• Car sales continue to improve
• Dublin Port traffic on the increase
• Industrial Production maintains January gains
• Exchequer Balance stops getting worse
• Fall in tax revenues eases slightly

However, as also noted some of the positive trends have an associated ‘but on the other hand’ to temper our optimism.  There is no doubt that things are getting less worse, but I don’t think we’ve quite ‘turned the corner’ yet.  We’re getting there though.