Irish costs eroding export base, warns IBEC
One of the big concerns now is that rising costs have been eroding our competitiveness base for some time.
Some economists excused high inflation on the grounds that a strong economy was bound to trigger some price pressure, which was an acceptable price to pay for rising employment and higher living standards.
In the past few days a few interesting figures have hit the headlines raising further concerns about the economy.
The FAS/ESRI vacancies survey on Wednesday showed services were the driving force on the jobs front in March as vacancies rose from 7% to 23% month on month.
Over the period it was the only part of the economy to report an increase in available jobs while vacancies in construction, fell for the second successive month.
It was too soon to draw conclusions from just two months figures an ESRI economist cautioned, but nevertheless agreed that the fall two months in a row echoed the concern that construction is sliding.
And as that phenomenon starts to hit home, concern is growing that we will not be able to compensate for the dip in construction through higher export sales from manufacturing and other exports.
The harsh reality is that since 2000 we have been hit by a sustained loss in competitiveness that has finally resulted in exports ceasing to make a contribution to our growth.
That is the big worry expressed yesterday by the main employer body, IBEC.
In a teaser document in the run-up to the election its spells out quite clearly that this country is continuing to price itself out of export markets.
Our share of global sales is falling and exports have ceased to contribute to our economic growth.
At this point we are hostages to construction which accounts for nearly a quarter of our growth while consumer spending has delivered most of the rest of the oomph in the economy or the feelgood factor that in fact less people are experiencing.
Rising inflation is starting to add to our woes. Consumer sentiment is starting to turn sour and higher interest rates, though still modest, are causing the bad taste in the mouth of consumers.
ISME, which is independent of IBEC, raises its own concerns on where this economy is headed.
ISME rightly points out that we cannot blame rising interest rates for the pressures starting to build up in this country.
Much of the inflationary pressure and the corresponding loss of export sales is directly attributable to costs that are being driven up by the State through higher stealth taxes or through over-generous wage settlements.
One of the problems facing us now is that both the consumer and the construction sector are starting to run out of puff and when that is added to the loss of exports revenues then the outlook for the economy starts to become more pessimistic.
As more US companies halt production in Ireland, or in the case of Amgen, postpone their €800m investment in Cork, the warning bells should be flashing.
But this Government seems impervious to what’s going on.
The big concern is that we have been feasting for the past 10 years on the back of the only real surge in Irish living standards since the year dot. And we seem incapable of facing up to the fact that the feast could turn to famine if we don’t cop on fast.
