Some real economic indicators, a few more forward-looking indicators, and a fair degree of anecdotal evidence are all pointing towards some slowing in Irish economic activity. In the event of the UK leaving with a deal and the prospect of a negotiated trading relationship further down the road, Ireland will breathe one hell of a collective sigh of relief.
And the negative economic vibes will do an about-turn. But it is worth taking stock of the damage that the Brexit storm has already caused. No one is suggesting a move towards outright recession is imminent, but it is clear the vast uncertainty and fear in relation to Brexit are taking a real toll on confidence and economic activity.
On the real economy side, the evidence of slowdown is certainly building. The housing market growth continues to decelerate, with the most recent data showing that in the year to August, national average residential property prices increased by 2% and Dublin prices declined by 0.3%. Outside of Dublin, prices increased by 4.4%.
This is certainly a positive development, but as well as affordability issues as a result of the Central Bank’s mortgage lending restrictions, and increased supply, there is certainly a growing sense of fear and uncertainty impacting on house buyer behaviour.
New car sales are down 7.3% in the year to date and the trading environment for the motor trade is challenging. Retail sales in the first eight months of the year were just 0.3% ahead of the same period in 2018 in value terms, and 1.2% in volume terms.
However, when weak new car sales are excluded, the retail sales performance is somewhat stronger, with the value of sales up by 2.9% and the volume of sales 4.6%. Manufacturing output in the first eight months of the year was up by just 1% on the same period in 2018.
The so-called modern component was down by 0.1% while the traditional component was up by 7.9%. This is a relatively weak manufacturing performance and does suggest some pressures emanating from the clear slowdown and uncertainty in relation to the global economic outlook.
On the confidence side, the pressures are also becoming increasingly obvious. The ongoing fragility and nervousness of the personal sector is demonstrated by the fact that consumer confidence fell to the lowest level in six years in September.
Brexit fears are leaning heavily on the Irish consumer. The Purchasing Managers Index (PMI) of manufacturing activity in September stood at 48.7. A reading below 50 signifies a contraction in activity.
The latest PMI for the construction sector showed a reading of 48.3 in September, which is the first contraction in activity since August 2013. Residential activity is continuing to expand, but commercial development activity declined for the first time in over six years.
The one piece of data that flies totally in the face of all this more sober news, is on the export front. In the first eight months of the year, the value of merchandise exports expanded by a very strong 10.9%, and despite sterling weakness and a much slower UK economy, sales into that market increased by 5.3%.
Even more impressive is the fact that exports of food and live animals have increased by 5.4%. It is not just the multi-national sector that is driving the stellar export performance.
Interestingly, in the first eight months, the UK accounted for just 10.8% of total exports, which is the lowest level on record. Of course, this statistic hides the fact that Britain accounted for almost 33% of total exports from that sector.
The overall reliance on the UK has reduced considerably over the years, but for indigenous exporters,particularly those in the SME sector, the UK still has a disproportionate share of Irish external trade. A point of note also is that we imported €13.6bn worth of goods from the UK, accounting for almost 24% of total imports.
This is where the potential for shortages of some food categories and other items on Irish shelves could become a real issue in the event of a no-deal Brexit. Hopefully, that eventuality is lessening somewhat.