The economy is recovery faster than expected, according to a new report issued today.
Bloxham Stockbrokers' Irish Quarterly Economic Outlook says that a number of indicators, including retail sales and PMI data, indicate that the economy is recovering at a quicker pace than expected by most economists at the start of 2010.
Bloxham now expects the economy to grow by 0.5 per cent this year on a GDP basis, compared to its previous projection in March of a contraction of 0.75 per cent.
The report suggests the fall in the euro is very encouraging for Irish exports because companies here benefit more than other euro zone nations from the currency's weakness against the dollar and sterling.
"We continue to look for a stronger dollar and sterling in the coming months. A strong British pound will in particular boost Irish 'indigenous' exports. Ireland will gain too from the fact that it has a higher percentage of its exports in services than any other western economy, Bloxhams says.
The stockbroker expects the export sector will lead the economic recovery but says the construction sector will continue to keep growth low fro some time to come. The stockbroker estimates that house completions this year and next set to be in the 10,000-15,000 range. This is well off the 93,000 in 2006 at the height of the boom. It also expects house prices to fall by a further 10 per cent this year.
Bloxhams says that prices and wages will need to fall by another 10 per cent in order to make the economy more competitive but believes the jobless rate is close to peaking at about 13.5 per cent. However, it suggests the labour market "will be the last piece of the jigsaw in the Irish recovery story."
"It will be the end of this year at least before there is an underlying improvement in the employment situation," it says.
The stockbroker forecasts consumer spending will be higher in real terms this year, driven mainly by individuals who don't have mortgages and carry little debt.
"Although we are not completely out of the woods yet, we believe the recession has ended, and assuming the euro zone 'debt' issue doesn't turn into a full-blown crisis, then Ireland should be roaring back up the euro zone GDP growth league table over the next twelve months, led in the main by a strong export performance," says Bloxhams.
