19/6/2014: Nominal Consumption in Ireland: 6 years of uninterrupted declines

As I blogged yesterday, Eurostat released data on individual consumption and GDP per capita for EU28 for 2013. There are different metrics for measuring income and spending per capita and I blogged on the Actual Individual Consumption and GDP per capita indices relative to EU28 yesterday here.

Updating the database for the other metric: Nominal Expenditure per Inhabitant, Actual Individual Consumption in Euro terms, here are the results:

Over recent years, Ireland sustained significant declines in consumption spending per person living in the country. How severe were these declines? Compared to pre-crisis average (2003-2007) our consumption was down 2.8% in 2013. This is the second most severe impact of a recession on households' consumption after Greece.

As the result of this decline, our ranking has deteriorated as well. In 2008, Ireland's consumption per capita ranked third in the EU28. In 2013 and 2013 we ranked 11th. If in 2007 Ireland's households' consumption exceeded that of the EU15 average by more than 31%, in 2013 this declined to only 5%.

Lastly, in raw numbers terms, our consumption expenditure per inhabitant in 2013 stood at EUR21,565 - below that of any other advanced euro area economy, save the 'peripherals'.

At its peak in 2007, our consumption expenditure per inhabitant was EUR24,978. More ominously - and in line with the dynamics in Domestic Demand reflected in our National Accounts - Irish individual consumption has now declined in nominal terms in every year starting from 2008, although the rate of decline y/y dropped to 0.19% in 2013, against decline of 0.32% in 2012, 0.48% in 2011, 2.9% in 2010, 9.9% in 2009 and 0.35% in 2008.

Remember: we have booming consumer confidence, claims of improving retail sales (not much of evidence of such) and generally positive outlook on the economy… and yet, consumption (aka demand) is declining, year after year after year for six years straight... uninterrupted.

18/6/2014: Ireland's Consumption & Income: Comparatives to EU

Eurostat released comparatives for GDP per capita and Actual Individual Consumption across the EU28 for 2013. And the results are bleak - for the likes of Ireland and rest of the 'periphery'.

Full release is here.

Key takeaways:

Chart 1 plots actual individual consumption in EU28. Ireland at 97 is in a poor 12th position, below EA18 average of 106.0 and below EU28 average of 100. Ireland is on par with Italy and is ahead of only 'peripheral' and Eastern European states.

But we are in an honourable 5th position when it comes to GDP per capita, thanks to the massive tax optimisation by MNCs driving our economy's aggregate numbers. At 126 reading for Ireland, we are well ahead of EA18 reading of 108 and EU28 reading of 100:

As I noted in my WallStreet Journal oped (here), Ireland is suffering from a tax-optimisation induced 'resource curse'. Here is the illustration:

Note: three countries under the EU Commission tax probe are the top three in the size of the gap between GDP per capita and individual consumption. Luxembourg is by far the leader here - partially due to same causes that drive Ireland's and Netherlands' gaps (MNCs tax optimising) and partially due to the fact that much of Luxembourg's labour force resides outside Luxembourg. Which means it's gap of 91.3% is over-exaggerating pure effects of tax optimisation on its economy.

So here we have it: Ireland's allegedly spending-happy consumers are below EU average, while our allegedly employment-generating MNCs are driving up activity that is not translating into actual spending by people living here... It's a resource curse, on par with what is happening in Luxembourg, Switzerland and Norway.

17/6/2014: Ireland's Regulatory 'Resource Curse'

My WallStreet Journal op-ed on the European Commission's investigation into Apple tax affairs in Ireland is linked here.