More positives than negatives to start of year

The new year has started off with a bang, with lots of business and economy stories to get stuck into.

The picture of the economy being painted so far is mixed, but on balance there would appear to be more positives than negatives, although the housing market report from the credit ratings agency, Fitch, has cast a dark shadow over a housing market that many believe may have stabilised during the latter months of 2012.

On the employment front, the two state agencies with heavy responsibility for job creation — Enterprise Ireland and the Industrial Development Authority (IDA) — reported on their activities over the past year.

Enterprise Ireland has responsibility for developing the export potential of indigenous Irish companies. Companies that it supports created 13,600 jobs during 2012, but 9,800 jobs were lost elsewhere, with a net gain of just over 3,800 jobs.

While this figure is not of the blow out the lights variety, the creation of that many jobs in a labour market that has been so utterly decimated since 2007, has got to be welcomed.

The IDA has responsibility for attracting foreign investment into the country, and it is still achieving considerable success in meeting this difficult challenge.

As the IDA results for 2012 show, during the year, 145 individual investments were undertaken, and the numbers employed by companies supported by the state agency jumped by 6,570 to reach 152,785. Not surprisingly jobs were shed by some IDA-supported companies, totalling 6,152, but 12,722 new jobs were created, giving the net gain of 6,570 jobs.

The IDA estimates that for every multinational sector job, 0.7 jobs are supported elsewhere in the economy, meaning IDA-supported companies account for almost 260,000 jobs.

This is a significant segment of the Irish labour market and of the overall economy, but one that is facing many challenges.

The key challenges include the ability to attract highly skilled labour from domestic sources, as well as from inside and outside of the EU; the state of play in relation to the cost competitiveness of the Irish economy; the increasingly competitive environment for mobile international investment; and the weakness of the European economy, which is an important market for many multinationals operating in Ireland. It is challenging, but Ireland is still punching above its weight division.

On Wednesday, Bord Bia announced exports of food and drink climbed above €9bn for the first time ever in 2012, representing a growth rate of 1.6%.

This is another good news story, particularly as this sector is pretty labour intensive and has very strong linkages into the domestic economy, in terms of where it sources its various inputs.

Bord Bia is aggressively helping its companies to build on existing markets and seek to break into new emerging markets.

On a negative note, the Fitch Ratings Agency expressed deep concern for housing markets in the peripheral economies of Portugal, Spain, Greece, Italy and Ireland. It believes that there is a risk that a further house price correction over the next 12 months, equal to around 10% on a national basis, could be seen in Ireland.

Despite the stabilisation that was evident in parts of the Irish housing market towards the end of last year, the scenario provided by Fitch is not unbelievable.

It remains to be seen what impact the ending of mortgage interest relief had on demand in the second half of last year.

My sense is that the Dublin market will do relatively well in 2013, but most of the rest of the country could remain in the doldrums. I have said it before and I will say it again, an external debt deal would work wonders for most everything in the economy.