Per Capita Consumption Resumes Fall

The release of the Q1 2011 National Accounts yesterday has sparked a variety of responses such is the inconsistency in the figures between differing quarterly changes in GDP and GNP as well as substantial revisions to the annual figures to 2010.

Here is a chart that uses two CSO data series:

1. Quarterly estimate of private consumption at constant market prices (seasonally adjusted)
2. Quarterly estimate of the population aged 15 plus from the QNHS

Although the CSO may not approve we will use these to create a rather crude measure of per capita consumption.  There are probably a number of difficulties with this approach which was prompted by a comment on recent falls in the Retail Sales Index.  Is the index falling because people are spending less as a result of decreased incomes or is the index falling because there are less people to spend as a result of outward migration?  We attempt to address that here.

So what do we see when we divide 1 by 2?

After flat lining for four quarters from the end of 2009, this series turned downward in the final quarter of 2010 and this has continued into 2011.  Per capita consumption fell 1.7% in the quarter and is down 2.5% on the year.  We can see that the most severe fall occurred during 2008 and we are now 11.5% below Q1 2008. 

It did appear that through 2009 and 2010 the worst of the fall was behind us but the start of 2011 undermines that view with per capita consumption resuming its downward path. This will not be to the approval of Minister for Finance, Michael Noonan based on this report.

In an appeal aimed at those Irish people who are holding a total of €134bn in savings accounts, Mr Noonan said it was time to return to normal shopping habits.

"What we really need is for people to go into the shops and start buying again,'' said Mr Noonan in a message to those who had the cash to spare.

“If that starts, with tourists visiting our shores stimulating the retail side, and is followed by our own ordinary citizens going about their shopping and beginning to spend again, then we begin to lift out of the crisis," he said.

A Supreme Court Judge on Economists

Today’s Irish Independent carries a report (HT: my colleague Geraldine Ryan) on an conference in Dublin yesterday on the use of expert witnesses in trials.  The article ends with some comments from a Supreme Court judge on the use of economists as experts in trials.

Meanwhile Supreme Court judge Fidelma Macken said economists proved to be the most frustrating experts to appear before a court as they were unable to clearly set out what they want to say.

"The bane of most judges' lives is to see a group of economists coming into court speaking the most unbelievably incomprehensible language known to mankind and it couldn't be just that all the judges are dumb," she said.

"There is this inescapable inability on the part of economists to explain what must be reasonably simple concepts in reasonably clear and simple terms."

Ouch! I wonder which economists have appeared in her court.

Yields go past 12% and we’re printing t-shirts

It might only have been for a fleeting moment but the measure of Irish 10-year bond yields as constructed by Bloomberg broke through the 12% barrier this morning.

It fell below 12% as quickly as it rose above it but at 11.9% the difference is marginal.

What has been the response of the Minister of Finance? “Let’s print some t-shirts.”  This is from a report in today’s Irish Examiner.

"We are thinking of printing t-shirts in the Department of Finance, they won’t be given out free, they will be for sale of course, saying ‘Ireland is not Greece’ ... across the front and back of them," Noonan said.

Jobs Month

A quick search of the RTE website unearthed the following stories that were published over the past month (23rd May to 24 June).  There were 17 stories posted to the website announcing new jobs.

• Tesco to create 522 jobs in €120m investment
• Dublin fund administration firm to expand
• New jobs promised as Pfizer plant is sold
• 70 jobs from MSD Cork investment 
• Symantec to create 60 Dublin jobs
• 35 new jobs for Gweedore plant
• Four firms to create 200 new jobs
• Aruba Networks to create 40 Cork jobs
• Cork outsourcing firm to create 150 jobs
• CityPOST announces 180 new jobs
• Creation of 160 new jobs announced
• 120 jobs for Waterford and Belfast
• 160 new jobs in seafood processing sector
• IT firm Marketo to create 125 new jobs
• Brown Bag Films recruiting for over 30 jobs
• 50 jobs announced in Kildare and Cork
• 50 new jobs announced by broadband firm

In total these announcement are around 2,000 jobs.  This may not amount to much in the face an unemployment crisis that has 352,000 classifying themselves as unemployed but at least it shows some signs of life in the labour market.  My search also revealed a number of stories reporting job losses but they numbered only about a third as many.

It is also important to note that these are ‘job announcements’ rather than ‘job advertisements’.  It could be a year a more before many of these come on stream but it is still better to have announcements like this rather than not.

March External Trade Data

It’s been a while since we looked at the CSO’s monthly External Trade data for Merchandise Imports and Exports.  We will get our first look at Services Imports and Exports for 2011 when the Balance of Payments is released with the National Accounts on Thursday.

Here we will examine the March External Trade Release with provisional overall figures for April.

The provisional figures for April show a rise in imports and a fall in exports, though the trend for both series remains positive.  Not surprisingly, these monthly changes mean that the balance of trade declined markedly in April with a fall to its lowest level in 16 months.

As the April figures are only provisional we do not have a breakdown by category that would allow us to explore the drop in exports and rise in imports in April.  The current release does give us the breakdown for March so we can have a look at the trade performance over the first three months of the year.

First up here are exports for the first quarter of the last five years. Click the table to enlarge.

The figures for 2011 are remarkable and for all the named categories, exports are ahead of the 2010 levels.  In fact the only  category that is behind on its 2010 performance is the generic “Other Commodities” category which only makes up 0.1% of the total but has shown a rather alarming 96% fall.  In categories making up 99.9% of the total exports are showing an annual increase.  There may be some classification issues at play here.

As per usual caution must be exercised when looking at aggregate merchandise trade data from Ireland such is the dominance of the Chemical and Pharmaceutical sectors in the figures.  For the first three months of 2011, exports from this category made up 62.6% of the total and are up 13.5% on 2010.  Of the €1.8 billion increase in exports, €1.7 billion can be accounted for by the Chemicals and Related Products category.  Excluding chemicals, exports are showing some annual growth but it is a much more modest 1.1%.

Compared to pre-crisis levels from 2007, exports are also showing positive performance with a 3.1% increase.  Again, however, this is largely down to increases in chemicals and pharmaceuticals.  Excluding Chemicals, Irish exports are still 24.6% behind those levels recorded in 2007 with most of this attributed to the Machinery and Transport Equipment category, and within that most of the drop is as a result of the fall in computer exports.

Some categories are up on their 2007 levels, most notably Food and Live Animals and Miscellaneous Manufactured Items which between them make up about one-sixth of our exports.

Next we turn to imports.  Again click the table to enlarge.

As per exports, imports are showing growth on their 2010 levels and this can be seen across all the main categories.  We will return to imports in a few minutes when we look at the figures on imports by use.

The final table by category is for the Balance of Trade.  Click to enlarge.

The trade balance for 2011 is at record levels and is 82% higher than that recorded in 2007 but it must be remembered that nearly 90% of this rise is due to the fall in imports rather than a rise in exports.

A second noticeable element is the dominance that the chemicals sector plays in determining our trade balance.  In fact, excluding Chemicals the balance of trade has been continually in deficit.  Up to 2010 this deficit had been declining but this was reversed in 2011.

The role Chemicals play in our export data cannot be overstated.  Over the past five years chemical exports have grown from about €3.5 billion a month to €4.5 billion a month with a large spike in March 2011 to €5.5 billion.

Excluding chemicals, the exports performance is not as “robust” or “resilient” as the first graph above would indicate, though there was a stabilisation from early 2010 and some tentative signs of improvement later in the year.

Imports on the rise – but in a good way

Today’s External Trade release shows that exports to March are up 8.5% on the year with imports showing a rise of 12.3% with the net effect of these leading to a rise of 4.4% in the balance of trade (though all of this is due to chemicals).  In the arithmetic of national accounts, imports are subtracted in the calculation that leads to GDP.  However, it is also important to look at the composition of those imports.

The CSO provide a useful table that gives a breakdown of imports by use. Click to enlarge

Imports are up €1.4 billion on the year and there is annual growth in all the categories.  What is noteworthy is that capital and intermediate goods for production make up nearly two-thirds of total imports.

Of the €1.4 billion rise in imports, €0.3 billion is for capital goods for production and €0.6 billion is for intermediate goods for production.  The remaining €0.5 billion is for consumption goods.

On the whole, the rise in imports may subtract from GDP figures now but over the coming months as these capital goods and materials are put into use it will lead to an increase in economic activity and a likely increase in exports which will push GDP up.  Here is the same data in a graph.

The rise in the imports of production materials since the middle of 2010 is evident as well as a gradual recovery in imports for consumption.  The capital goods series is more volatile.

Here are a couple of notable import categories that are also showing increases.

1. Petrol

2. Cars

3.  And some goods involved in production

After scratching around for the past two years, these categories have been showing some smalls signs of growing over the first three months of the year (though they are all well down on the peaks of 2006 and 2007 – see graph here).

Labour Market Status – the full-time employed

The QNHS may be beginning to signal that stabilisation in the labour market is not far away.  In a previous post we examined the principle economic status of individuals.  Here we focus on the group who classed themselves as ‘at work’ to determine how real this stabilisation is.

Here is a snapshot of the labour market status of the population aged over 15 since 2003.

Two things are immediately obvious from this graph.

1. The increase in the population aged over 15 stopped in the middle of 2007.
2. The fall in the number of people in full-time employment since the middle of 2007.

The reasons for the stalling of the population over 15 have been discussed elsewhere (it is largely the departure of non-Irish nationals).  Here we will look the numbers in employment.

Looking at the total number employed it suggests that labour market conditions are back to those last seen in early 2003.  Since the peak in 2007 the numbers employed in Ireland has fallen by 346,000.  The decline is continuing and two-thirds of the fall in the past year has been among non-Irish nationals who have subsequently left the country.  However, from the perspective of overall economic performance it doesn’t matter who they are and the 55,000 decline in employment in the past year is a continuing negative sign. We can also see the breakdown on the patterns on which is it likely the CSO’s seasonal adjustment methodology is based, the problems with which were noted here.

However, looking at the total numbers employed only gives a partial picture.  Next we consider the number of people in full time employment.

This is far worse than the total number employed and the decline is showing no signs of abating. Full-time employment is now back to levels last seen in 1999.  If this continues we will drop below the levels recorded at the start of the dataset in 1998.  When we examine the breakdown by gender we see that one group already are.

Male full-time employment is back to levels last seen in 1998.  Female full-time employment is declining and is back to 2004 levels.

Although the level of full-time employment has continued to head south, part-time employment has continued onward ever upward.

And these increases have been seen for both genders.

This reduction in full-time employment and increase in part-time employment gives rise to the following.

After hovering around 83% for nearly a decade the proportion of workers who are employed full-time has now declined to 76%.

The final graph of this set looks at the change in male employees and self-employed workers.

Since the middle of 2008 the number of male employees has fallen from 925,000 to 720,000, with a fall from 299,000 to 236,000 for male self-employed workers.  The equivalent fall for females employees is from 856,000 to 779,000 while the number of female self-employed workers fell from 63,000 to 57,000.  Male employment is down 268,000 with an 83,000 drop in female employment.