IRELAND is now experiencing a retail boom with consumers spending more on everything from cars to holidays while savings are falling to their lowest. level since 1989, according to the latest quarterly report from the Economic and Social Research Institute.
And the feel good factor driving the consumer boom is here to stay, with further strong economic growth expected over the next two years. The ESRI expects the economy to grow by 6 per cent this year and by a further 5 per cent next year, although agricultural exports are expected to suffer as a result of the BSE crisis in the UK. The ESRI estimated that the BSE crisis has already resulted in a permanent loss to the economy of £150 million.
The positive forecasts from the ESRI came as the Minister for Enterprise and Employment, Mr Bruton, announced more than 700 new jobs for Dublin, Cavan, Waterford and Limerick. Some 530 of the jobs are being provided by American companies in the electronics and computer sectors although the Belgian company, Pauwels Trafo, and the Swiss group, ABB Transformers, are to create 160 jobs in expansions of their existing operations.
According to the ESRI, consumers are expected to continue spending, leading to an even higher level of personal consumption this year than last. Car sales and indirect tax receipts over the summer point to a rise of about 8 per cent in retail sales over the year. As a result, savings have fallen and for the first time since 1989 make up less than to per cent of disposable income.
Disposable incomes will rise by 6 per cent this year and next, boosted by falling tax rates and personal income from property.
But exports, particularly of electronics, have fallen off. The institute expects this to reverse again by next year as growth in major export markets picks up.
The picture is less rosy for agricultural exports. The report also stresses that there is still "considerable uncertainty" on the prospect for a pick up in beef consumption in Europe. It adds that even if there is a recovery there will be a substantial fall in the value of beef exports in 1996 as a whole.
Imports are also expected to significantly increase this year. Tourism will be especially buoyant with a 10 per cent increase in volume forecast for this year. Spending by tourists abroad is also expected to rise substantially.
The good news continues with inflation which is set to remain low - at below 2 per cent until the end of next year. The ESRI is also predicting that around 36,000 new jobs will be created this year, slowing to 28,000 in 1997.
Despite the optimistic forecasts the institute stresses that pay settlements in 1997 will need to be both moderate and flexible to ensure qualification for the single currency.
The economy is now doing so well it is difficult to see what could keep Ireland out of the single currency, according to the American investment bank, Morgan Stanley. This view is now so dominant on international financial markets that European and US funds have been pouring billions into Irish Government bond markets in recent weeks. Last week, turnover on a couple of days exceeded £1 billion, as the markets placed large bets that Ireland will be a founding member of monetary union in 1999.