Inside the world of business
Dr Doom says Irish economy is going to get even sicker
THE OECD did its bit earlier in the week to shake us out of our happy royal/presidential torpor and yesterday, Dr Doom himself did his bit definitively to restore the gloom.
Speaking in Budapest, economist Nouriel Roubini repeated earlier warnings about the parlous state of the Irish economy and added in some new ones for good measure. Nicknamed Dr Doom for having predicted a “catastrophic” and unavoidable global financial meltdown in 2006, Roubini isn’t known for his sunny outlook. Equally though, he isn’t known for talking through his hat, at least not all the time.
Roubini expects a “disastrous” sovereign debt crisis will engulf us within three years, brought on by the mounting cost of bailing out the banks.
“Eventually the back of the Government is going to crack,” Bloomberg reported Dr Doom as saying. He went on to promise an Irish sovereign debt crisis within two to three years.
But wait. Didn’t we already have one of those? Well, Greece would probably have said the same thing before all the talk of restructuring and euro-zone exit recently emerged.
Another point made yesterday by Roubini that may perhaps cause greater concern to an Irish Government pinning its hopes on international recovery is that markets around the world are at a “tipping point” of a correction. This will, Dr Doom declared, cause risk aversion and volatility to grow as the economy slows.
Oh dear, you might say, before you attempt to seek comfort in the consistency (or otherwise) of the high-profile doctor’s earlier predictions. Specifically, you might look at the autumn of 2008, when Roubini said that stock markets still had “significant downside risks”. There promptly followed a stock-market rebound in most parts of the globe, taking the edge off the Doom moniker a touch. It can only be hoped that the progress of the Irish economy over the coming three years will reduce his doominess even more.
Not shopping up a storm
THE RETAIL industry took the opportunity of poor new sales data from the Central Statistics Office (CSO) yesterday to remind us of its stance on wages. The retail sector Joint Labour Committee is “destroying jobs”, Retail Ireland said in its statement. It is not enough for Minister for Enterprise Richard Bruton to adjust Sunday pay rates, the Ibec-affiliated group wants a full abolition of the JLC system.
Regardless of the rights and wrongs of sectoral wage agreements, they are not the reason the retail sector is doing so badly in the first place. Having taken several batterings in recent years, consumer confidence remains fragile. Significant shifts in behaviour are now apparent.
Many retailers reported steady footfall during the recession, but said turnover was down due to lower average spends.
Yesterday’s data, however, suggests this, too, may actually be under threat.
In its analysis of the retail sales index, Goodbody Stockbrokers points to how fuel prices have contributed to the sector’s weak performance in the opening months of 2011. Not only have higher petrol and diesel prices eaten into shoppers’ disposable budgets, they appear to be deterring people from going shopping at all.
“The rise in prices has contributed to changing consumer behaviour ie less travelling. This is backed up by the fact that while the value of motor fuel sales have remained effectively flat over the past 12 months, the volume of sales fell by 12 per cent,” noted Goodbody.
Abolition of the JLC system might ease retailers’ cost headaches for a while, but it won’t help them overcome such fundamental barriers to brisk trade.
Elan’s grand designs
SHARES IN Irish biotech Elan hit a two-year high this week in the latest bit of good news for a company that seems finally about to overcome the problems that had threatened at one stage to overwhelm it.
Finding a way of assessing the risk of multiple sclerosis patients on its Tysabri therapy getting (or even more importantly not contracting) the potentially deadly side effect progressive multifocal leukoencephalopathy (PML) has given both the company and the market confidence in what is now a $1 billion drug which the company forecasts will grow revenues at least by 15 per cent per annum and which aims to double its market share.
The well-received sale of the Athlone-based drug technology unit, whose revenues saw Elan through lean times, is both a vote of confidence in its science and a means to paying down debt to comfortable levels. Using a small portion of that money to take a quarter share of drug discovery business Proteostasis has also gone down well in the market, with shares adding close to 18 per cent this month alone.
And, as the company was hosting a trouble-free annual shareholders’ meeting in Dublin, Johnson Johnson was outlining the merits of its drugs pipeline to investors in the US. At the event, Sheri McCoy, vice-chairwoman to the executive committee, said bapineuzumab, the Alzheimer’s therapy being developed with Elan and Pfizer, may have “the most potential” of any of JJ’s experimental drugs nearing approval.
Little wonder then that new Elan chairman Bob Ingram, citing the success of Roche acquisition Genentech in oncology drugs, said this week that the Irish company “has the potential to become the Genentech of neuroscience”. Grand visions indeed.
Next week
Live register figures to be released on Wednesday will reveal whether the slight fall in unemployment in April continued in May.
Podcast
John Collins finds out about Ernst Young’s views on business in India, gets Dominic Coyle’s view on Elan and hears about the race for the IMF top job from Arthur Beesley. irishtimes.com/business/podcast
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