Irish exporters appear to have shaken off concerns over Brexit and global trade wars — but only for the time being — while consumer spending remains lacklustre, according to the evidence of official data and surveys.
In welcome news for exporting firms battered by the slump in sterling since the UK voted to leave the EU almost three years ago, CSO figures showed exports from the Republic to Britain climbed to more than €3.6bn in the first three months of the year, up 9% from a year earlier.
And in a healthy sign of overall trade, the value of goods imported from Britain climbed 16% to almost €5.1bn in the same period.
Analysts have long pointed out that the plans of Brexiteers could end up being self-defeating for British interests because the value of the goods the Republic imports from Britain is much larger than the goods it exports to Britain.
However, the threat that the UK could still tumble out of the EU without signing up to a transition deal remains a big risk for the Irish economy.
Against the euro, sterling slumped to 87.16 pence as markets bet that Theresa May would lose her last gamble to get her EU withdrawal deal through the Commons.
Moreover, many international experts have warned that the global trade war between the US and China will inevitably have widespread effects for Irish exporters and importers.
Capital Economics in London has warned any escalation that leads to President Donald Trump in setting his sights in the coming weeks on rewriting the US trade agreements with Europe would have severe effects on Ireland’s economy.
In a new report, Capital Economics said it believes the financial markets “are too complacent” in pricing in the risks of trade rows dragging in Europe.
In its latest assessment for the UK, it predicts Britain will “probably be buffeted by global trends”, pushing UK stock prices 10% lower and sterling down from $1.29 to about $1.25.
However, a Brexit deal later this year would help boost UK economic growth in the next two years, meaning that UK stock markets would regain current levels by the end of 2021.
For Europe, any escalation by the US in its China dispute, such as extending tariffs to car duties, would have significant effects.
“Looking ahead, we have long been of the view that stock markets in the eurozone (and elsewhere) would fall this year as the global economy slowed, and that in the event equities in Italy would fare especially badly owing to problems at home,” Capital Economics said.
“However, should the US extend tariffs to all imports from China and/or impose duties on its imports of autos, we suspect that the Dax (Frankfurt’s stock index) would do just as poorly and that the Cac (Paris’ stock index) would also fall sharply,” it said.
Meanwhile, the latest consumer spending index (CSI) survey by Visa — which measures all spending by cash, cheques and by cards in Irish stores and online —suggests that Brexit and trade worries continue to weigh on consumers here.
“Although in positive territory for the second month running, the CSI pointed to a relatively modest pace of growth compared with the series history,” it found.
The survey found that Irish instore spending rose 1.2% in April compared to April 2018, helped by spending in bars and restaurants, while eCommerce spending rose 2.2% — its lowest rate since January 2018.