The Irish summer of 2004 is proving to be a damp squib so far but fortunately the disappointing weather is not dampening the Irish economy.

Virtually all of the economic indicators that track current conditions are now pointing to an economy that is growing at an annual rate of at least 5 per cent. The benefits are already being felt in the financial markets with the announcement this week by NTMA that it did not plan to issue any more bonds this year. This is a direct consequence of the buoyancy of tax receipts due to the strong economy.

The Exchequer Borrowing Requirement (EBR) is now expected to come in well below the initial estimate and could be as low as €1.3 billion. NTMA had initially planned to issue €4 billion of new bonds this year but the success of its bond auctions in the first half of the year combined with lower Exchequer borrowing means that no further issuance is now required.

This will have a positive impact on the Irish bond market. The general level of yields is of course determined by overall trends in the euro zone bond markets. However, Irish government bonds will trade on yields that are below the average of other euro- zone bonds. For example the yield on the Irish 10-year bond is 4.19 per cent compared with 4.45 per cent for the equivalent Italian bond.

Of even greater significance is that the Irish yield is marginally below the German 10-year yield of 4.29 per cent and the French 10-year yield of 4.27 per cent.

This means that the Irish government can borrow funds at a cost that is now the lowest in Europe.

The sharply improved conditions in the Irish economy and a general improvement globally have only been partially reflected in the stock market. Recent figures issued by consultants Mercer/Heissman show that the average Irish pension fund rose by 5.1 per cent in the first six months of the year.

This looks good compared with the world equity return of only 1.4 per cent. Irish pension funds benefited from the outperformance of the ISEQ index and also enjoyed currency gains as the dollar recovered ground against the euro and as sterling continued to strengthen.

The pension fund performance data do, however, show that the recovery in share prices over the past year has still not been enough to compensate for the damage inflicted by the bear market. Over the past three years the average return from pension managed funds is still negative at -3.4 per cent per annum. Over five years the position is not quite so bad with a well-below-par annual return of only 1 per cent. It is only over the 10-year period that returns are in line with long run expectations with a 9.5 per cent per annum return.

If the flow of news regarding the economy has been good, it is equally true regarding the flow of news from quoted Irish companies.

Earlier this week CRH, the market's largest industrial company with a capitalisation of €9.5 billion, issued a statement concerning current trading conditions. The tone of the statement was very positive and the company indicated that profits before tax (PBT) in the first half of the year would be €100 million higher than in the same period last year.

The second half of the year is more important to CRH but nonetheless the company expects PBT post goodwill to "show a healthy advance on the reported 2003 level of €864 million". Brokers are now forecasting full-year 2004 profits of around €960 million, with earnings per share (EPS) growing by about 12 per cent.

CRH is now a multinational company operating in many markets across Europe and America. The Irish home base is still very important and has generated steady profits over many years. Volumes were strong in the first half of the year but price increases failed to offset cost pressure, so that overall Irish profits will be similar to 2003.

Housing growth was strong but commercial/industrial activity was somewhat subdued. The company's performance in the UK is expected to be good, with a modest improvement in profits. In contrast a substantial improvement in profits from mainland Europe is expected. Better weather had a positive impact in Poland and Finland whilst demand in Switzerland remained strong.

Trading is also strong across the group's operations in America. New England had a slow start but has since picked up whilst the central region was mixed but the west started well.

After a couple of years where overall profits were flat, it is clear that CRH has re-entered a phase where profits are likely to grow steadily.

This should in time be reflected in a higher share price and it should also underpin overall market sentiment given CRH's bellwether status on the Irish equity market.