PAUL TANSEY ANALYSISTHE GOVERNMENT is falling deeper into deficit as the economy slows to stalling speed. That's the central message from the raft of recent data monitoring the economy's pulse.

On the face of it, the Live Register figures for April, published yesterday, do not look too bad. The seasonally-adjusted numbers on the Live Register fell by 200 to 199,700 in April, having jumped by 12,000 during March.

However, much of this dramatic improvement appears to reflect an early Easter.

Discounting for this Easter effect, State training agency Fás noted yesterday that "the latest figures point to an underlying increase of 5,000 in the month of April. More generally, the numbers signing on have increased by 41,000 in the last 12 months with the majority of this increase - 28,100 - coming since the start of this year".

The steep deterioration in labour market conditions since the start of the year has been reflected also in the growing number of redundancies.

In the first four months of the year, 11,118 redundancies have been reported to the Department of Employment, an increase of more than one-quarter on the redundancies reported in the same period of 2007. Moreover, more than half of all redundancies this year have occurred in manufacturing and construction.

The slowdown, which commenced in the construction sector, is now spilling over into consumer spending. Rising unemployment, poor employment prospects, falling house prices and price rises that are confiscating most of the additions to money wages are, in combination, sapping both consumer spending power and consumer confidence.

When consumers fear for the future, they rein in their spending.

Both the downturn in the housing sector and weakening consumer spending are evident in the exchequer returns for the first four months of the year, published yesterday.

The Department of Finance had already bitten the housing bullet on the stamp duty front in the 2008 Budget, anticipating a decline of 10.6 per cent in stamp duty revenues this year. But the department had anticipated a small advance in capital gains tax (CGT) receipts during 2008.

Judging by the year to date, this expectation will be frustrated. In the first four months of the year, receipts from CGT are €334 million or 36 per cent below profile. This reflects not only falling house prices and steep declines in the levels of transactions, but the fall in other asset prices, particularly ordinary shares. On the consumer spending front, VAT receipts in the four months to the end of April were €277 million, or 5.4 per cent below expectations.

While the yields from most other taxes are in line with expectations, the poor performances put in by CGT and VAT have caused total tax revenues to dip €736 million below their anticipated levels in the first four months of the year.

This is causing two problems. First, short of the discovery of a hidden cache of uncollected taxes, it now appears inevitable that the total tax take this year will be lower than the amount of tax revenue collected by the exchequer in 2007. Already, in the first four months of 2008, the tax inflows into the exchequer are €927 million or 6.5 per cent below the amount collected in the corresponding period of 2007.

Second, the exchequer deficit for the year, targeted at €4,866 million, will be eclipsed by a large margin. Already, in the first four months of 2008, the exchequer has run up a deficit of €3,742 million. Thus, while just one-third of the year has elapsed, more than three-quarters of the deficit budgeted for the full year has been incurred.