jim power fbd dundlak sep 2009
DESCRIPTION
Jim Power, Chief Economist, Friends First gives his economic outlook for the next quarter.TRANSCRIPT
Economic & Financial UpdateFBD Financial Solutions, Dundlak
Jim Power
September 10th 2009
The International Background
• Clear evidence of recovery emerging in all international economies
• Strong stimulus working• Banking difficulties being sorted out• Still many structural imbalances that will take
time to work through• Recovery unlikely to be V-shaped, but more
gradual• Grounds for optimism!
Global Economic Outlook
: Source OECD 2009Sep
2008 2009f 2010f
OECD 0.8% -4.1% 0.7%
Euro Area 0.5% -4.8% 0.0%
United States 1.1% -2.8% 0.9%
United Kingdom 0.7% -4.3% 0.0%
Germany 1.0% -6.1% 0.2%
France 0.3% -3.0% 0.2%
Japan -0.7% -6.8% 0.7%
UK PMIs
30
35
40
45
50
55
60
65
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Manufacturing Services
UK House Prices (Nationwide)
-20
-15
-10
-5
0
5
10
15
20
25
30Ja
n-00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
%
Euro Zone PMIs
30
35
40
45
50
55
60
65
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Manufacturing Services
German Ifo Survey
707580
859095
100
105110115
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
US Consumer Confidence
0
20
40
60
80
100
120
140
160
Jan-
90
Jan
-92
Jan-
94
Jan-
96
Jan-
98
Jan-
00
Jan
-02
Jan
-04
Jan
-06
Jan-
08
US ISM Indices
30
35
40
45
50
55
60
65
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Manufacturing Non-Manufacturing
Interest Rates
• Rates at historic lows, reflecting economic exceptional difficulties
• ECB rate at 1%, US 0-25%, UK 0.5%• Inflationary pressures non-existent• Happy to live with lower rates, mindful of
past mistakes• Rates will rise once recovery becomes
sustainable• Upward pressure second half 2010?
The Irish Economic Background
• Economy in deep recession• Construction & Consumer under significant
pressure• Public finances still awful• Labour market developments very negative• Consumer prices falling• Export performance holding up, but driven by
foreign-owned sector• Still considerable uncertainty over banking sector
Why is Consumer Worried?
• Rising unemployment & wage cuts• Fiscal pain & uncertainty• Personal wealth destruction• Falling house prices• Equity markets & pensions• Interest rates a positive • Serious downward pressure on disposable
incomes• Very challenging consumer background &
outlook
Tax Revenues
- 2009 ( )JAN AUG YoY
Customs -23.8%
Excise -19.1%
Capital Gains Tax -68.8%
Capital Acquisitions Tax -18.7%
Stamps -64.9%
Income Tax -8.0%
Corporation Tax +40.5%
VAT -21.6%
Total Tax -16.1%
The Housing Market
• Dynamics still very weak• Excess supply, constrained demand• Prices still falling & likely to do so into
2010• Completions -47.8%, Registrations
-77.4%, Commencements -69.2%• Price adjustment 50%+ peak to trough• <15,000 completions in 2010• Very difficult market
House Prices (PermanentTsb/ESRI
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0M
ar-9
7
Mar
-98
Mar
-99
Mar
-00
Mar
-01
Mar
-02
Mar
-03
Mar
-04
Mar
-05
Mar
-06
Mar
-07
Mar
-08
Mar
-09
%
Conditions for Economic Recovery
• International economic cycle needs to improve-starting
• Stabilisation of housing market- 2010• Solution to banking crisis-NAMA crucial• Exchange rate improvement-outside of our
control• Fiscal certainty-taxing way out of recession
difficult• Competitiveness - follow the German model• Path to recovery will be very challenging, but
private sector response gives hope!
Equity Market Update
YEAR TO DATE FROM LOW-POINT
S&P 500 +11.6% +48.9%
German DAX +11.7% +46.8%
French CAC +11.6% +42.7%
FTSE 100 +9.6% +38.4%
Nikkei +15.0% +44.4%
ISEQ +29.0% +57.8%
Equity Markets
• Strong rally over past 6 months• Markets concluded that strong policy response
would work• Optimism has been vindicated• Lots of good news now built in• While outlook seems positive, may be a bumpy
ride• Good news for pensions
Thank you!