Economics 25/06/2009: Unemployment and IMF

While many of you are wondering where is my comment on last night's IMF report, I must ask you for your infinite patience - it is forthcoming in this week's Sunday Times and I will be posting more on the issue over time.


In the meantime, the US Bureau of Economic Analysis (BEA) reports today that the real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 5.5% in the first quarter of 2009, (that is, from the fourth quarter to the first quarter), according to final estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP decreased 6.3%.

I can see our strategy to wait for Americans to turn around working... thanks to the Irish Government tough choices on policy side, US GDP contractions are flattening out. Happy times are just around the corner.

Of course, one cannot suggest that the Irish Government is not doing more than just help the Americans in their troubles. Indeed, hat tip to BL, Politics.ie have the following itinerary for our Dear Leader of Offaly, Knight of the Bogs and Lord of the Bord Na Mona Mansions:
23.06.09:

• Brian Cowen attends the official re-opening of Shinrone National School, Birr, Co. Offaly
• Brian Cowen raises the First Green Flag at Coolderry Central School, Birr, Co. Offaly; and
• Brian Cowen attends the Official Opening of Isotron Ireland’s new Electron Beam Sterilisation Facility, at Tullamore, Co. Offaly

Of course, Mary Coughlan, the Grand Dame of Diplomatic Etiquette and the Lady of Jobs Announcements Junkets was equally busy jet-setting across the nation to announce jobs:

• 45 at Boston Scientific plant in Galway (after cutting 240 jobs in Galway last August and as another motor trade company sheds 70 jobs in Galway the same day as Mrs Coughlan arrived there);
• alongside Gaeltacht Minister Eamon "Gimme More Subsidies" O'Cuiv visiting west Donegal today to assess the damage caused by flash floods (I didn't know the DETE is also responsible for emergency services in this country); but
• Flooding aside, she did have a chance to pull an unveiling string at the launch in Finnabair Business Park in Dundalk...
  

All in the day's work for Tanaiste, directly responsible for dealing with our soaring unemployment rate (on the exact day when CSO unveiled the latest unemployment data from QNHS).
Of course, neither Biffalo-Gruffalo, nor Scary-Mary are much of the IMF/Economic Policy men (women), so why not let poor rookie, Brian Lenihan deal with the opposition fire on the issue of yesterday's damming report? Afterall, as the US data shows, things are already getting better (by getting worse at a slightly slower pace than before)... "The heart attack patient has no pulse, Doctor," shouts the nurse. "Excellent, things have bottomed out then," retorts Dr Biffalo, "Pints!"

Economics 19/06/2009: IMF on NAMA and Construction Data

Per Reuters report (here), IMF is about to publish long over-due Consultation Paper on Ireland.

IMF, allegedly, will recommend Ireland "retain the option of including additional types of loans, such as residential mortgages, in its "bad bank" scheme for housing bad debts".

This if proven correct will open NAMA to an additional downside of some €30-40bn in stressed residential property loans, which cannot be foreclosed or enforced for political reason. A costliest form of rescuing the ordinary homeowners, as compared with directly repairing their balancesheets via cash/assets injection. It will completely politicize NAMA. Hence, I will be revising my NAMA cost estimates upward in days to come.

The Indo reports that the IMF had calculated that Ireland's "structural deficit", which excludes the impact of economic fluctuations on revenues and spending, could be as much as 10 percent of Gross Domestic Product (GDP), or 18 billion euros ($25 billion). Brilliant. If proven right, IMF will be bang-on with my estimates from December 2008 and full 1.8 percentage points ahead of DofF numbers.

"It (the IMF) will endorse the widespread view that most of the correction must now come on the spending side, rather than through more tax rises," the Irish Independent wrote. Now, recall that Brian Lenihan and his adviser, Alan Ahearne, told us that no serious analyst was sugegsting, at the time of the Mini-Budget of April 2009 that the Government should focus more heavily on spending cuts, and thus, per Lenihan, huge tax increases in April budget were justified. Of course, many analysts, ncluding myself, replied that this was a lie back at the time. Now, IMF is falling behind our view.

Now, two things worth mentioning before the report is out.

First, a birdie told me that the IMF was 'convinced' by the Government to delay publication of its report until after the local elections.

Second, another birdie told me that the report was less watered down than usual, because the usual 'consultative' process where by the Governments get to vet some of the IMF's recommendations and analysis in rounds of bargaining broke early in April/May.

I am looking forward to this report...

CSO data on Production in Construction and Building sector:
When a picture is worth a 1,000 words...
No signs of 'bottoming out' or 'Green Shoots' above Q1-Q2 2009 are dire and getting worse for the private building sectors. But what about the so-much touted 'Fiscal Stimulus' on our Brian-Brian-Mary 'Public Investment' side?
None! all is dead on Civil Engineering growth side, courtesy of a lie that is our public investment stimulus.
And things are getting much worse with time across the entire Residential and Non-Residential Building sectors.
But do spot an odd one out...