Prudence was never more important as Baltic Dry Index collapses
For weeks, now, we’ve heard a sequence of economic headlines about Ireland that would make you think all is sweetness and light.
Exchequer returns are up strongly, GDP is advancing faster than forecast and employment is growing.
Foreign Direct Investment levels are high and anecdotal evidence points to fresh strains on road and port facilities as the economy continues to surge.
Within this bubble the narrative has shifted from one of crisis management to that of a party atmosphere.
Calls for pay increases and tax cuts are growing together with demand for increased spending as if the recovery of 2015 is a sure-fire guarantee of good times ahead.
That brings us back to the Baltic Dry Index: a measure of how much it costs to transport goods on shipping containers worldwide.
The worrying news is that the BDI has collapsed over recent weeks and now stands at levels not seen since, wince now, 2008.
If the world is in such a wonderful state that we can afford to cut taxes and increase spending why are shipping costs in freefall?
Why, too, have oil prices started to tumble again, and were under $38 earlier this week?
Commodities, generally, are dropping in price as we approach year end.
If the global economy was buoyant, these things should not be happening.
Instead, we need to observe closely, and plan accordingly, for a much tougher ride in the world economy.
Large populous nations like Brazil, Malaysia and Russia are in recession. China is an uncertain market where official forecasts are deeply suspicious.
These so-called developing economies were supposed to be key drivers of the global economy but are now struggling to stand still.
Their currencies have declined sharply against the euro, sterling and the dollar.
We need to take all this into account when approaching 2016.
With a general election in the offing the temptation to grab our short-term economic buoyancy and use it to fund vote-winning give-aways is enormous.
It is hard to see how the global economy will avoid a recession in 2016.
If that is so then it is a challenge to envisage robust growth rates across North America and Europe.
Instead, the world economy will be anaemic next year and against that backdrop the need for prudence and care in managing the Irish economy has rarely been more important.
The key objective for any Irish policymaker as we work through an election and afterwards should be to create sustainable jobs.
Each newly minted job cuts into welfare spending, lowers the headline unemployment rate, and invigorates morale and confidence in the domestic economy.
The addition of sustainable jobs will only occur if a competitive and reliable business environment is fostered and encouraged.
That means strong messaging around both corporate and personal taxes, controlled national spending, and prudence about national debt levels that remain ultra high.
The stars could not be better aligned in Ireland currently.
From an impoverished base, the domestic economy is recovering with construction at its core.
Being a net energy importer collapsing oil and coal prices are helping manufacturing costs.
A euro at multi-year lows against sterling and the dollar is stimulating exports. Borrowing costs, too, are at levels not seen in many years.
All of this, combined, delivers a package of positives that cannot last forever but in the short-term are creating a sense of collective giddiness inside the Irish economy.
Those who bear the scars of economic volatility of 2008-2010 will know that economic conditions change quickly and when they do it is those who are prudent and conservative who fare best.
That applies to individuals, corporates and economies so those who are pencilling in a period of unrequited munificence should keep a close eye on the Baltic Dry Index.
When it goes cold things can get frosty.
Joe Gill is director of Corporate Broking with Goodbody Stockbrokers. His views are personal.
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