16/12/2011: QNA for Q3 2011: 'exports-led recovery' myth

In the first post on Q3 Quarterly National Accounts, we looked at the data on real rates of growth in the Irish economy based on sectoral decomposition (linked here). Now, let's take a look at the expenditure-based data. Please keep in mind - Q3 2011 was the record-busting quarter in terms of exports growth for Ireland, with the latest data pointing to falling growth rates in Irish external trade for Q4 2011 (see here). In addition, keep in mind that unlike the DofF that projects Irish GDP growth to be 1.3-1.6% in 2012, most of the euro zone is factoring in contractions for H1 2012 (see details here).

So down to data now.

In nominal terms,

• Personal consumption continued its precipitous fall in Q3 2011, declining €291mln (-1.4%) qoq and €283mln (-1.4%) yoy. Relative to Q3 2007, personal consumption is now down €3,085mln or 13.3%.
• Net expenditure by central and local government, is down €61mln (-1.0%) qoq and €110mln (-1.7%) yoy. Compared to Q3 2007, net government spending is down 12.1% or €869mln.
• Exports of goods and services are up €373mln (+0.9%) qoq and €1,025mln (+2.5%) yoy. Exports are also up on Q3 2007 by some €3,849mln (+10.2%)
• Imports of goods and services are down €192mln (-0.6%) qoq but up €1,033mln (+3.3%) yoy.

Thus, GDP at current market prices is now down €703mln qoq in Q3 2011 (-1.8%) and down €1,011mln (-2.5%) yoy. Compared to Q3 2007, GDP is down €7,030mln (-15.4%) in current market prices.

In current market prices, value of profits expatriated abroad net of profits inflowing from abroad has risen €189mln (+2.4%) qoq and is up €1,076mln (+15.5%) yoy.

As the result, GNP is now down €612mln (-1.9%) qoq and down €2,063mln (-6.3%) yoy. GNP in current market prices is down €9,092mln or 22.8% on Q3 2007.

Personal consumption in nominal terms now stands close to the level of Q3-Q4 2005. Fixed capital formation is at the level roughly 1/3 of the Q1 2005.

Things are pretty dire in constant market prices terms as well:

• Personal consumption fell €182mln (-0.9%) qoq and €822mln (-3.9%) yoy. Relative to Q3 2007, personal consumption is now down €2,744mln or 12.1%.
• Net expenditure by central and local government, is down €88mln (-1.4%) qoq and €259mln (-3.9%) yoy. Compared to Q3 2007, net government spending is down 13.9% or €1,035mln.
• Gross domestic capital formation also continued falling in Q3 2011, with qoq decline of €1,234mln (-27.1%) and yoy fall of €955mln (-22.2%). Relative to pre-crisis level in Q3 2007, Q3 2011 investment in this economy came in at €5,754mln less (a decline of 63.2%).
• Value of stocks of goods and services has contracted €173mln in Q3 2011 qoq (-26.7%). 
• Exports of goods and services are up €786mln (-1.9%) qoq and €947mln (+2.4%) yoy. Exports are also up on Q3 2007 by some €2,650mln (+7.0%)
• Imports of goods and services are down €1,865mln (+5.9%) qoq but up €997mln (+3.3%) yoy.

GDP at constant market prices is now down €836mln qoq in Q3 2011 (-2.0%) and down €57mln (-0.1%) yoy. Compared to Q3 2007, GDP is down €3,318mln (-7.6%) in constant market prices.

Value of profits expatriated abroad net of profits inflowing from abroad has fallen €262mln (-3.1%) qoq but is up €1,347mln (+19.8%) yoy.

As the result, real GNP is now down €574mln (-1.8%) qoq and down €1,404mln (-4.2%) yoy. GNP in current market prices is down €5,398mln or 14.4% on Q3 2007.

So once again, that 'exports-led recovery' is, predictably not enough to keep economy above the waterline. And this is the case for Q3 2011, when "net exports (exports minus imports) grew by

21.8% at constant 2009 prices compared with the same quarter of last year." Record growth in exports before the slowdown hit in Q4 2011, and still recession in the overall economy.

16/12/2011: QNA for Q3 2011 - that R-thing again

Initial estimates for Q3 2011 released by CSO today show that seasonally adjusted, GDP fell 1.9% qoq  and GNP declined 2.2% qoq. Year on year, GDP is down 0.1% and GNP is down a whopping 4.2%.

In constant prices terms, real GDP fell €836mln qoq in Q3 2011 (-2.0%) and €57mln yoy (-0.1%). Relative to the peak in 2007, real GDP is now down €3,318mln or -7.6%. In constant prices terms, real GNP is now down €574mln (-1.8%) qoq and €1,404mln (-4.2%) yoy. Compared to peak 2007, GNP is down €5,398mln (-14.4%).

Output in Agriculture, Forestry and Fishing has fallen (in constant market prices and seasonally adjusted) €348mln (-30.2%) qoq, but is up 15% or €105mln in yoy terms. Relative to pre-crisis 2007 levels, sector output is up €104mln (+14.8%).

Industrial production declined €1,036mln (-8.7%) qoq and is up €419mln (+4%) yoy, while registering an increase of €227mln (+2.1%) on Q3 2007. These figures combine booming exporting sectors and collapsing building and construction sector. In building & construction, output grew €16mln (+1.9%) qoq, but is down €224mln (-20.4%) yoy and is down €1,423mln (-62%) on Q3 2007.

Distribution, transport & communications sector - a brighter spot last quarter, shrunk €129mln (-2.4%) qoq and is down €¡37mln (-2.6%) yoy. Compared to Q3 2007, the sector is down €1,064mln (-17.1%).

Other services, including rent are up €225mln (+1.3%) qoq, but down €531mln (-3.0%) yoy. The sector is down €1,889mln (-10%) on Q3 2007.

Chart below shows annualized returns by sector using data for the 11 months through November 2011 annualized using historical trends:

And the chart below shows in more detail the plight of Building & Construction sector:

Overall forecast for real GDP and GNP for 2011 based on data through November 2011 is not encouraging:

In the chart above, analysis of the latests data and historical trends suggests that 2011 GDP can come in at 0.7% growth rate, with GNP declining by -0.7% at the same time.

Net factor income from abroad - aka MNCs profits expatriations - declined in Q3 2011 to €8,136mln - or €262mln less than in Q2 2011. MNC's profits expatriation is now running €1,347mln ahead of Q3 2010 and €2,197mln ahead of Q3 2007 as record exports are fueling transfer pricing. So that 'exports-led recovery' thing... oh, it's dead in the water, folks. As predicted, record exports are not enough to sustain the entire economy. But more on this in a follow up post with detailed analysis of expenditure-based QNA.

16/12/2011: Ireland-Russia bilateral trade, September 2011

Based on yesterday's data for external trade, let's update Irish bilateral trade in goods data with Russia.

Irish exports to Russia totalled €46.9 million in September, up 61.2% yoy, against Irish imports from Russia of €7.8 million, up 14.7% yoy.

Irish trade surplus with Russia stood at €39.1 mln in September, up 75.3% yoy.

Revising annual forecast, I now expect Irish exports to Russia to reach €520 million in 2011, against €373 million in 2010, while Irish imports from Russia to settle at €125 million, down from €159.7 million in 2010. The resulting annual trade surplus will be around €398 million or more than the combined trade deficits in Irish trade with China and India in 2010.

January-through-September period trade surplus data for various non-EU countries expressed in millions of euros are detailed in the table below:

So in terms of trade surplus, Russia was Ireland's 5th most important trading partner.

15/12/2011: Euro zone and Euro Big 4 forecasts

Here's the latest summary of the Insee forecasts for Euro Big 4 and euro zone as a whole:

These are largely consistent with the Eurocoin forecasts to-date. Do note in the table above that unique Irish strength of 'exports-led recovery'. When it comes to 2010 exports growth - Ireland recorded growth of 8.07% (QNA data) in overall exports expansion, les than euro area's 10.9%, Italy's 8.9%, Spain's 13.5%, Germany's 13.4% and France's 9.3%... and these are all large economies (with less openness to trade than Ireland).

15/12/2011: External Trade for October 2011

Data for external trade for Ireland for October 2011 is out (preliminary estimates) and the picture of the general slowdown in the economy in Q4 is now being confirmed in the exports sector.

Overall,

1. Seasonally adjusted exports fell by 4% to €7,652m in October, while imports increased by 3% to €3,937m, resulting in an 11% decrease in the trade surplus to €3,715m.
2. Overall exports fell €358.4mln mom (-4.47%). Year on year exports in october were up €299.1mln (+4.04%) and relative to October 2009 exports are up €1,306.9mln or +20.60%. It is worth noting that average exports volumes for January-October 2011 stand at €7.692bn - ahead of the October monthly reading by €40mln - a small difference, but this is the first month since July that we are seeing exports below average.
3. Imports rose €98.4mln (+2.56%) mom and €339.3mln (+9.43%) yoy. Relative to October 2009, imports are up €526mln or +15.42%.
4. Trade balance fell €456.8mln mom in October (=10.95%) and €42.1mln (-1.12%) yoy. Relative to October 2009, trade balance is still up hefty €780.9mln (+26.6%).

Charts below illustrate:

Note that the trade balance remains on the upward sloping trend and the sub-trend is both steeper and above the historical trendline, which is, obviously a very strong development. Imports continue to underperform below the trendline, something that we can expect to be corrected once capes returns to exporting sector and also as the euro depreciates (margins on transfer pricing shrinking).

Terms of trade improvements are now virtually exhausted (although the data here is through September, not reflective of the gains in terms of trade that are materializing out of the latest weakening on the euro).

 Mom terms of trade deteriorated by 0.7 index points of 0.92%, however, year on year Irish exporters are enjoying strong gains of 7.88% and relative to September 2009, terms of trade have improved 10.54%. (Note: in the chart above, improvement in terms of trade is reflected in the lower value of the index).

It's worth noting (chart above) that exports are responding to terms of trade improvements well ahead of trend for the third year in a row, consistent with increasing transfer pricing component in our trade. This picture is further confirmed by the increasing sectoral concentration of our exports in pharmaceutical and medical devices sectors.

Overall imports-intensity of exports - the ratio of exports value to imports value has risen in October, as index moved from 208.7% in September to 194.4% in October (-6.86%) and year on year there has been relatively similar deterioration of 4.9%. This compares against the historical average ratio of 156.0%, implying that currently transfer pricing is running at a higher rate than average.

As noted earlier, imports are now rising faster than exports, reflective of cyclical stocks of inputs exhaustion and this can be a net negative going forward if the MNCs begin to see slowdown in new orders. In other words, as imports of inputs begin to outpace exports of outputs, stocks of finished goods will rise, implying that in the future, stocks of finished goods contribution to GDP will shrink, unless new orders take these stock out.

Despite good performance, seasonally adjusted trade flows are suggesting some troubles ahead for the trade balance. Annualized data based on previous years monthly series generates the forecast for Irish imports of €48.53bn in 2011 (+5.98%yoy against average annual contraction in 2008-2010 of -9.85%) and exports at €91.41bn (+2.42% yoy - well behind the target of 4.3% and well behind 2010 annual gain of 5.26%). This implies the forecast trade surplus of €42.89bn or some 1.35% less than in 2010. The crucial point for the GDP is how much stock build up activity we are going to see in November-December. And for GNP, the added critical issue is whether the MNCs will accelerate their profits expatriation or not.

Overall, there are signs (albeit still relatively weak) of the slowdown momentum building up in exports.

13/12/2011: European Summit and Markets Efficiency

One thing that clearly must be disheartening for the perfect markets efficiency theory buffs (supposedly there are loads of them around, judging by the arguments from the 'State Knows Best' camp, though I personally know not a single one who thinks that markets are perfectly efficient) is the speed with which the markets produced an assessment of the Euro zone's latest 'Grand Plan'.

Frankly speaking, the ink was still drying on the last week's summit paper pads and it was already clear that the new 'Solution' is not a solution at all and that the Euro zone crisis is not about to be repaired by vacuous promises of the serial sinners not to sin in the future.

This blog highlighted back on the 10th of December (here) the simple fact that Euro zone is highly unlikely to deliver on its newly re-set old SGP criteria targets, no matter what enforcement (short of Panzer divisions) Merkozy deploy. And in a comment to Portuguese L'Expresso (see excerpts here and full text here) and elsewhere I have said that instead of resolving the debt crisis, European leaders decided to create a political crisis.

Many other observers had a similar assessment of the latest Euro Land Fiasco pantomime that was the Summit. And yet, despite the factual nature of analysis provided, I was immediately attacked as a token Euro skeptic and an Anglophile.

Now, more confirmation - this time from the EU Commission itself (presumably this too has evolved into a Euro skeptic and an Anglophile institution overnight) - that the propposed Merkozy Pact is (1) extra-judicial and (2) largely irrelevant to the problem at hand. Today's Frankfurter Allgemeine reports that the new Pact will be - per EU Commission opinion - part of an inter-governmental treaty, which is subordinate - in international law - to any European treaty. This, in turn, means that a country in breach of the 'quasi-automatic fiscal rules - 3%-0.5%-60% formula - can simply claim adherence to existent weaker rules established under the fully functioning European treaties. This, in turn, will mean that there can be no application of the new Pact rules.

Thus, the new Merkozy Pact is subordinated to the weaker fiscal rules under the SGP and any extra-SGP enforcement of these rules is subordinated to the SGP procedures. Can anyone explain how, say Italy, can be compelled to implement the new Pact, then?

Meanwhile, of the other 'agreements' reached at the Summit, the EFSF agreement represents the weakening, not the strengthening of the previous Euro area position. In fact, post Summit, the EFSF is about to lose its AAA status (as France is preparing to lose its own AAA rating). S&P has the EFSF AAA-backers on negative watch and under a review, Moody announced yesterday that it will be reviewing AAA ratings across the Euro zone and Fitch labeled the Summit a failure. And amidst all of this EFSF is going to remain about 1/3 of the size required to start making a dent in the Euro zone problems. That, of course, assuming it can get up to that level - a big question, given pending downgrade and previous difficulties with raising funds.

The third pillar of the Euro zone 'strategy' for dealing with the crisis - the permanent ESM - also emerged from the summit in the shape of a party balloon with a hole in its side. Rapid deflation of the ESM hopes means that even with 'leverage' option, the ESM will not be able to underwrite liquidity to Italy and GIP, let alone Spain & Belgium. Furthermore, there is a question yet to be asked of the European leaders. Fancying ESM at €500 billion might be a wonderful exercise in fictional narrative, but where on earth will they get these funds from?

The fourth pillar of the 'strategy' was the IMF merry-go-round loans carrusel. Now, recall that brilliant scheme. The IMF has strict (kind of strict - see here) rules on volumes of lending it can carry out. But Euro zone problems are so vast, the IMF limits represent a huge constraint on the funding it can provide to the common currency debt junkies. So the EU came up with an 'Cunning Plan'. The EU will lend IMF €200 billion (which EU doesn't really have) and the IMF can then re-lend EU between €800 billion (under old rules on IMF lending) or up to €2 trillion (under that new 'leverage scheme'). Note: IMF doesn't really have this sort of money either.

So a junkie will borrow somewhere some cash, lend it to his dealer-supplier, who will then issue junkie a credit line several times greater than the loan, so the junkie can have access to few more years of quick fixes. Lovely. When you think of it, the irony of the EU passing a new 'Discipline Pact' with one stroke of pen, while leveraging everything it got and even leveraging the IMF to get itself more debt with the next stroke of pen takes some beating in the land of absurdity.

But fear not. The IMF is not likely to engage in this sort of financial engineering. Not because its new leader, Christine Lagarde - who comes from the European tradition of creating massive fudge out of monetary and fiscal policies - objects to it. It is unlikely to do so because its other funders - the US and Japan and BRICs etc are saying 'No way, man' to the Euro zone's plans. The US expressed serious concerns that Euro zone's plan will lead to US losses on IMF funds, while Japan's Fin Min Jun Asumi said that Europe must create a functional firewall first, before any IMF involvement can be approved. He also stated Japan's support for US position.

And so we have it. Post-Summit:

• There is no effective new 'Treaty' or enforceable new rules
• There is no enhanced EFSF and the old one is about to lose all its firepower
• There is no feasible ESM
• There is no Euro-leveraging of the IMF

Oh, and the ECB is becoming increasingly non-cooperative too.

And amidst all of this, the newsflow gets only worse and worse for Europe's battered economies. Greece is now projecting GDP decline of 6% in 2011 and 3% in 2012. The new deficit projections for 2011 are at 9% of GDP or €2.6 billion worse than the annual budgetary forecast of 8.5% deficit. Ditto for Belgium, where 2011 deficit is heading for 4.2% of GDP - 0.6 percentage points above the budgetary target (€2.2 billion shortfall). And, of course, there is that post-boy of austerity - aka Ireland - where Government tax revenues are collapsing as data through November shows (see details here).

So reality bites, folks. Markets are clearly not perfectly efficient. But once they discover the truth about the Euro Summit, fireworks will begin.

13/12/2011: Sunday Times 11/12/2011

The unedited version of my Sunday Times article from December 11, 2011.

Billed as the Budget that will fundamentally change our fiscal policy over the long-term, the documents released this week have managed to make history. Indeed, Budget 2012 was a record-breaking one in three ways.

Firstly, Government’s retreat over the issue of disability payment cuts for the younger beneficiaries has to mark the fastest policy reversal ever achieved by the State. Secondly, by labelling new revenue measures in health services as expenditure cuts, Minister Howlin has managed to perform a minor miracle of transfiguration – transforming sweat and labours of ordinary insurance card holders who will now pay higher services charges into a Public Sector reform.

Thirdly, the Government set another speed record that will be hard to match. Within just 9 months after coming to power, the Coalition has magically morphed into a Fiana Failesque clone, replete with Bertie-style creative thinking which equates economic growth with property incentives.

The 2012-2015 profiling of spending and tax measures, released by the Department of Finance clearly shows that this Government has adopted Brian Cowen’s approach to crisis management. Tax measures are frontloaded into 2012 and 2013 at €2.85 billion out of the total €4.65 billion. The bulk, or €5.55 billion, of the spending cuts out of the total of €7.75 billion were delayed until 2013-2015. Within spending reductions planned, capital cuts are frontloaded into 2012-2013, while current spending reductions are pushed back. In other words, the Government is delaying the painful reforms in a hope that something turns up to rescue the Exchequer revenues.

This much is clearly reflected in the Department of Finance’s overly optimistic outlook for growth. The Budget estimates appear to reflect the Department November 2011 forecast for 1.6% 2012 growth in GDP. Subsequent revision downward to 1.3% projected GDP growth in 2012, revealed on Tuesday, seems to be a window dressing to suggest caution as they clearly were introduced sometime around December 5th and 6th – with no time alter core budgetary estimates. Afterall, the Department Monthly Economic Bulletin, released this Monday continues to project 2012 growth at 1.6%. Even at that, the Department projections exceed most recent forecasts by the ESRI (0.9% GDP growth) and OECD (1.0% growth).

Past 2012, medium-term projections envision 2014-2015 growth coming in at a lively 3.0% per annum, boosted by booming exports and investment assumptions. Balance of payments, the metric that reflects economy’s overall ability to generate external growth, will skyrocket more than seven-fold from 0.5% this year, to 3.7% in 2015.

The country drowning in the sea of middle class debt, collapsed domestic investment, crashed consumption, rampant emigration, skills drain due to excessive taxation and exploding growth in the black markets, in the view of the Department of Finance economics experts will shrug off the depression and get back to the business of filling Government’s coffers with cash.

Incoherent numbers set the stage for incoherent policies.

The Government that is concerned with deposits stability in the Irish banking sector and talks about the need for investment is frontloading capital cuts and has introduced three measures on DIRT, CGT and CAT that will do exactly the opposite of what it tries to achieve. The Government that incessantly drones about jobs creation has managed to publish a budget that will further depress investment, reduce disposable incomes and increase costs of doing business in this country. To make things worse, the Budget also made hiring workers more risky by increasing the future cost of redundancies. With measures like these, the only jobs creation that will be taking place in Ireland for the foreseeable future is going to be taking place in the Fas-run schemes.

The Government that talks about exports-led recovery has managed to introduce not a single measure to help exporters. An exports credit guarantee scheme and ringfencing of new tax incentives for marketing Irish goods and services abroad would have helped. As would a scheme to encourage technical skills importation in the sectors where such skills cannot be found locally. None came.

Plagued by declining tax revenues the Budget unveiled three measures – VAT, fuel and tobacco taxes increases – that will see Black Market economy booming once again at the expense of legitimate businesses.

On the expenditure side, the very same Government promising deep reforms loaded the Budget with small-scale measures that neither address the issues relating to the value-for-money in public services delivery, nor achieve substantive real savings, nor improve productivity in the sector.

Take one of the largest ‘reforms’ – the reduction in the numbers employed in the public sector. At 6,000 planned reductions in 2012, the target is un-ambitious. More importantly, it marks the very same ‘extend-and-pretend’ approach to change that is traceable across the entire Budget. Instead of taking the medicine upfront and setting a target at 12,000-15,000 reductions, the Government opted to increase uncertainty about future positions and promotions for those who stay in their jobs. The fact that even the shallow target is to be achieved solely through early retirement adds insult to the injury. Early retirement schemes solemnly lack any connection between employees’ suitability for their jobs, their performance on the job, and other meritocratic metrics. As the result, early retirement schemes will not enhance overall levels of productivity in the workforce.

Minister Howlin, and with him the rest of the cabinet, simply appear to be unaware of what reforms are supposed to achieve. What is really needed is a comprehensive independent review of all positions across all departments and subsequent involuntary removal of those who are unsuited for their jobs.

There is also no joined-up thinking on welfare system reforms. For example, introducing a refundable tax credit per child at a mid-range rate of, say, 20%, would make the credit automatically means-tested. This would also make the scheme virtually self-administered for the majority of the recipients and allow to focus more resources on the cases where special help is needed most.

There is a virtually hit-and-run feel to the Government’s grasp of what constitutes long-term change. At this stage in the crisis, it is clear that sooner or later, the sacrosanct basic rates of social welfare as well as the unlimited nature of benefits will have to come to the chopping block. There is no economic growth path that can get us out of this painful corner.

Yet, instead of tackling the problem head on, the Government attempted once again to move along the margins, selecting individual sub-groups of aid recipients in a hope of ‘striking gold’ – finding the least vociferous ones for the hit. This is done in a naïve belief that the loudness of the group complaints is somehow proportional to the need for assistance. The end result is that those most in need, but are present in smaller numbers, got the stick, while the able-bodied adults with lesser merit claim to help are getting their carrot.

There are no reforms of the public sector pay and pensions in the Budget. The gargantuan bill for new and existing state retirees will fall this year by just €500,000 and is expected to decline by less than 2.3% in years ahead.

With social welfare fraud rampant Minister Joan Burton cheerfully reported back in August this year that her Department delivered €345 million worth of savings tightening enforcement of the welfare payments in just 7 months of 2011. Why is then Budget 2012 aiming to generate just €41 million in new fraud reduction-related savings for the entire 2012?

Despite the rhetoric, Budget 2012 was another windows-dressing for avoiding painful reforms. The new curtains of ‘austerity’ will now adorn the rotten façade of state finances until the whole structure crumbles over the next 2 years under the weight of our debts and structural recession.

Box-out:

Back in July 2010, the Minister for the Environment published a relatively un-ambitious Report of the Local Government Efficiency Review Group. The report reviewed the cost base, expenditure of and the numbers employed in local authorities in Ireland. It identified some marginal savings to the tune of €511 million comprised of €346m in efficiencies and €165m in improved cost recovery and revenue raising to be gained from introducing very moderate set of reforms, such as joint administrative areas for some sets of counties; reductions in senior management and other staffing levels; greater efficiency in procurement; more use of shared services, such as joint inspectorates and regional design offices; and better financial management. None of these suggestions have made it into specifically costed savings under the Budget 2012. Which begs a simple question – why?

12/12/2011: What if - the value of the punt nua?

For those of you have been reading recent (weeks old) reports that Irish punt, were it to be reintroduced, can witness appreciation relative to the dollar or 'old' euro, here's the table from Nomura research that, in my view, more accurately reflects what's going on:

Even the above estimation suggest long-term equilibrium value (5 year horizon post-introduction) for the punt, in my view, which means that on the downward adjustment path it is likely to undershoot the new equilibrium level and first move to a devaluation of more than 28.6%. The problem in terms of predicting the actual short-term movement in the punt is that we will have to deal with a number of problems that will take place simultaneously upon re-introduction of the new currency. The analysis is also sensitive as to the nature of transition from euro to the punt, as well as to the assumptions on debt to be carried over into new currency against the debt remaining in foreign currency.


Note: specially for those trigger-happy readers, this is not, repeat not, my view on viability of the punt or the desirability of exit from the euro or retaining the common currency. This is simply 'what if' argument.

12/12/2011: Are debt repayments to be blamed for growth collapse?

Some of the paper have clearly reached a bizarre level of Keynesian paranoia. Behold one example - The Guardian today (link here) screaming "Debt repayment is driving the EU back to recession".

While I agree with the idea that EU (more like the Euro zone to be accurate - do note that, folks from the Guardian) is heading into another recession, I highly doubt the cause of this is 'debt repayment' (note that the tense suggests that it is currently ongoing repayment) fault. Here's why:

Table above, taken from the IMF WEO September 2011 database clearly shows that not a single euro area member state is currently repaying its debts.

And in fact, as the table below details, NOT A SINGLE euro area state will be repaying any of its debts until the earliest 2014, when Greece is expected to start paydowns on its debts (under very rosy assumptions, of course):

Interestingly, IMF expects that in 2015 and 2016 overall debt levels will continue rising in ALL member states except for Greece.

So, run by me again that headline from the Guardian?

12/12/2011: Bonds starting position for the week

Couple of very handy charts from Dolmen Stockbrokers on week opening in bond markets:

The above clearly show risk-off condition at the start of this week when it comes to European sovereigns and risk-taking positions in the corporate debt markets.

And a handy summary of current corporate deposit rates across Irish financial institutions:

The above highlights the closely-realigned relationship between risk and deposit rates with permo leading the pack of 'sickies' and EBS following the lead.

12/12/2011: QNHS Q3 2011 - Take 2

Another quick note on the QNHS latest data:

• Total labour force is now down 147,600 on peak levels
• Total employment is down 346,800 on peak levels
• The demographic dividend is bust.

Table of sectoral changes to summarize latest data (note, public sector data is from the main QNHS, so it is less accurate than data reported in previous post):

Notable differences arise in terms of part-time and ful-time employment changes. relative to pre-crisis levels, full-time employment is down 21.5% while part-time employment is up 9.6%. Thus, overall quality of employment is deteriorating rapidly. But while yoy full-time employment is being displaced by part-time employment -3.69% to +1.76%, qoq both part-time and full-time employment is shrinking.

Relative to pre-crisis levels, employment is down in all sectors except Transportation & Storage (+3.28%),  ICT (+9.35%),  Education (+3.02%), and Human Health and Social Work Activities (+9.46%).

Overall number in employment is down 15.82% on pre-crisis levels. Meanwhile, of sectors that posted declines in employment over the same period:

• Largest declines were recorded in the collapsed Construction (-59.53%), in the allegedly-booming Agriculture, forestry and fishing (-28.9%) and Industry (-23.25%). 
• In addition, Administrative and support services (-20.25%) and Accommodation and food service activities (-18.01%) posted deeper than average cuts.
• Shallow cuts were recorded in Financial, insurance and real estate activities (-6.12%) and Public administration and defence; compulsory social security (-5.45%)

12/12/2011: QNHS Q3 2011

Headline unemployment number out of QNHS for Q3 2011 is at 14.4% up on 14.2% in Q2. This is bad, but not as bad as two other core labour market performance parameters.

On a seasonally adjusted basis, Irish employment fell by 20,500 (-1.1%) in Q3 2011. This follows on from a seasonally adjusted fall in employment of 4,100 (-0.2%) in Q2 2011 - an acceleration of 5-fold!

Unemployment increased by 15,700 (+5.3%) in the year to Q3 2011 and the total number of persons unemployed now stands at 314,700.

Meanwhile, the long-term unemployment rate increased from 6.5% to 8.4% over the year to Q3 2011. Long-term unemployment accounted for 56.3% of total unemployment in Q3 2011 compared with 47.0% a year earlier and 25.5% in the third quarter of 2009.

The total number of persons in the labour force in the third quarter of 2011 was 2,120,300, representing a decrease of 30,200 (-1.4%) over the year. This compares with a labour force decrease of 51,800 (-2.4%) in the year to Q3 2010.

Charts to illustrate the above:

Adding to this emigration, the above chart paints the picture of mass-exodus from the labour force, most likely due to twin effects: layoffs and tax increases.

Now, updating figures for public v private sector employment:

 CSO provides more accurate, by their own admission, figures for public sector employment in the Table A3 of the QNHS release. Here is the summary, excluding temporary Census 2011 staff:

• Civil service employment in Q3 2011 stood at 39,900, up on Q1 2011 39,500 reading and unchanged on Q3 2010. In Q3 2008 the same number stood at 43,000 so net reductions on pre-crisis level are 3,100 or 7.2%.
• Total public sector excluding Semi-State bodies stood at 339,900 in Q3 2011, down 8,400 on Q3 2010 and 5.6% lower than in Q3 2008.
• Total public sector employment including Semi-State bodies is now at 392,900, down from 399,000 in Q1 2011 and down 8,200 on Q3 2010. Compared to Q3 2008, public sector total employment is down 24,000 or 5.8%.
• Total private sector employment is at 1,123,600, down from 1,147,800 (-2.1%) year on year and down 194,800 on pre-crisis levels or -14.8%.

So to summarize - public sector employment is down 5.8% relative to pre-crisis levels, while private sector employment is down 14.8%.