Recession ends but . . .

THE economy may have technically emerged from recession but almost 445,000 people are now signing on the dole – the highest number in the history of the state.

The latest economic figures from the Central Statistics Office (CSO) show Gross Domestic Product (GDP) rose by 2.7% in the first three months of this year, compared with the fourth quarter of last year. The figures show that a return to growth in Ireland was largely due to a surge in exports.

The bad news, however, was that other seasonally adjusted figures from the CSO show that despite the return to economic growth the numbers on the Live Register increased from 439,100 in May to 444,900 in June, a jump of 5,800. This month’s figure shows an increase of 37,200 compared with the same month last year.

Unemployment now stands at 13.4%, up from 13.2% in May. This compares with 12.9% in the first quarter of 2010.

Figures show house prices are also down by nearly 50% from their peak and continue to shed value every month.

Companies also continue to suffer a serious downturn, with lending falling 3.4% in the year to May 2010.

The serious loss of consumer confidence continues to be reflected in the lending figures with household credit, which covers residential mortgages and credit card debt, also dipping over the period by 1.5%.

Overall, household credit fell 0.2%, while credit card repayments beat new spending by €56 million, confirming consumers’ reticence to spend in the uncertain climate, with credit card debt down by 0.4%.

Residential mortgage lending fell 1.8% to €145.8 billion during May, a decline of €352m.

A new report from Sherry FitzGerald found house prices in Dublin have now lost almost half their value. Houses in Cork have also been hit hard, with prices down just over 13% in the last year, it said. However, estate agents say they are starting to see signs of life in the market.

Nationwide, the average price of a second-hand house in Ireland fell by 2.8% in the second quarter of this year, unchanged from the previous quarter. This brings the total drop in prices to 13.5% during the 12 months to June 2010.

Finance Minister Brian Lenihan, who predicted Ireland would move out of recession in the summer, said the latest figures was concrete evidence that Government steps to tackle public finances and the banking system were paying off.

“Today’s figures also show that exports are performing strongly, while consumer spending has stabilised,” he added.

Alan McQuaid, economist with Bloxham Stockbrokers, said the numbers are “very encouraging” and feels Ireland is well on track for a return to good growth from 2011.

The consensus is for GDP growth of around 3% in 2011, which does not look particularly ambitious in the light of the new data, said Austin Hughes, economist with KCB Bank.

Simon Barry, chief economist with Ulster Bank, said the economic turnaround isn’t without risks. “It will be critically important from an Irish perspective that a global double-dip is avoided if the domestic economy is to continue along the recovery path,” he said.

Meanwhile, up to 800 nurses in the country’s largest private hospital network will consider strike action if management refuses to return a 5% pay cut.


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