Figures reflect our Jekyll and Hyde economy
On one hand the external trade numbers indicated the ongoing buoyancy of the export side of the economy, while on the other hand the latest data on mortgage lending shows just how dead the housing market is and the extent to which mortgage credit has virtually dried up in the economy.
The trade data for September shows that in the first nine months of the year, the value of merchandise exports, which excludes the services such as tourism that we export, was 4.1% higher than the first nine months of 2010. The value of exports in September was 2.7% higher than September last year. In the first nine months, a total trade surplus of €33.3 billion was recorded, which was almost 2% ahead of the same period in 2010. In the first eight months, exports of food and live animals showed growth of 15%, while exports of chemicals and pharmaceuticals expanded by 8.5%.
In the context of the very stark slowdown in global economic activity, this export performance is very impressive, although the pace of growth is clearly losing some momentum.
The performance of the agri-food sector is particularly encouraging and the farming interest groups are certainly well within their rights on calling on the Government to do nothing in the budget that might undermine the competitiveness of that increasingly important and high-value added sector of the economy.
One issue that does concern me about the export numbers is that exports to Belgium totalled €9.5bn in the first eight months of the year. This makes that country Ireland’s second largest export market by value, behind the United States, but well ahead of Britain. This has got to do with some accounting rinky-dinks from the multinational sector.
The value of the agri- food side is much more real and has much more of a value added impact on the economy.
The latest mortgage data on the other hand does not make for pleasant reading. Total mortgage lending in the third quarter reached the staggering total of €623m, which is almost 50% of the level achieved in the third quarter of last year. In the first nine months of the year a total of €1.82bn was lent for mortgages purposes, compared to €3.76bn in the same period last year. It now appears that total mortgage lending for the full year will be around €2.3bn. This compares to total lending of €39.9bn at the peak of the madness in 2006.
These numbers are quite simply staggeringly weak and suggest the market is effectively dead. The banks could well argue that this is due to the lack of demand for mortgages from a suffering and pretty downbeat populace, but in my experience demand does exist but the banks are quite simply not in the business of lending. There will be no stabilisation and certainly no recovery in the housing market until banks start to lend again. I wouldn’t hold my breath.
Another notable feature of the past week was another clear demonstration of the paucity of the political classes. The Government will have to take very tough decisions if it wants to get the public finances into a sustainable situation. However, as evidenced by the student marches, the resignation of a labour minister and the reaction in the towns where army barracks are going to be shut down, it will not be easy to make any decisions.
Indeed, any decision will elicit a wave of opposition so it represents a real no-win situation for Government. What will make it particularly difficult for Government are the pre-election promises that were made. It was truly cringe-inducing to hear the playback of Eamon Gilmore’s pre-election statements in relation to the Mullingar barracks, and indeed the promises that were made by both parties in relation to third-level fees.
There is also growing evidence that the Government parties are filling up various boards with their own political cronies. These are exactly the actions that so discredited the last three parties in government. We thought we had voted for something different. Fair play to Nessa Childers for highlighting the pressure brought to bear on her over the disastrous decision to nominate a Department of Finance official to the European Court of Auditors. Much has changed, but nothing has really changed.
