Evidence is growing that Ireland's economy is set to benefit from a huge surge in the US, suggesting that a significant rise in Government tax revenues and a fall in the jobless rate will not be far off, senior economists have said.
The hopes come as an authoritative survey shows Irish manufacturing started to boom in recent weeks and is struggling to keep up with global demand sparked by the US stimulus cheques of President Joe Biden.
AIB chief economist Oliver Mangan said the April returns for purchasing managers working at the heart of Irish manufacturing plants had reached "record or near record readings", as factories based here join in "a global rebound in industrial activity".
Significantly, manufacturing employment rose at a fast pace in the month and expectations of continuing growth for the next 12 months were also running at a record level.
Similar surveys of manufacturing around the world in recent days tell the same story of a global economy that is set for a huge rebound.
The Irish manufacturing survey is, however, closely watched because so many of the goods made by multinationals at plants here — such as pharmaceuticals, medical devices and computer parts — are destined for global markets that are rapidly rebounding from the Covid-19 slump.
If the manufacturing trends are maintained, there is potential for parts of the Irish corporate tax receipts to rise, said Kieran McQuinn, research professor at the ESRI.
Prof McQuinn said that the ESRI may now look to increase its targets for economic growth and Government tax revenues this year, amid signs the recovery is taking hold a bit faster than anticipated, and unemployment may fall faster by year-end to below the 10% rate the ESRI had previously forecast.
"There is more of a sense of optimism that is tied in with the public health news, even in the last couple of days, which has been a bit better than most people were expecting," Prof McQuinn told the. "It gets at this idea that normal economic conditions are set to resume and are set to resume, if anything, a little bit quicker than we were anticipating," he said.
Independent economists say that Paschal Donohoe, the finance minister, and Michael McGrath, the expenditure minister, have been talking up the costs of the pandemic unemployment payments and the wage-support schemes as a way of managing expectations.
"There is likely to be another surge in Irish corporate tax revenues this year," Mr Power said because of the outsized contribution big tech multinationals such as Apple and Google make to the Irish exchequer.
That will boost income tax receipts, while spending will rise sharply in the summer months from pent-up household savings, helping to boost Vat revenues from their Covid slump, he said.