14/9/15: Europe's Gen Jinx: At Home and Stagnating

One fascinating map:

Source: qz.com

And here is the same data set for 2013:

Source: qz.com

Plotting percentage of people aged 25-34 living with their parents across the continent (plus the U.S.), the map tells a very interesting story. Consider the following issues relating to these numbers. Higher % of prime working age adults living with their parents 

• Implies lower mobility of prime working age cohort across jobs and career opportunities (poorer labour market matching);
• Lower exposures to key skills, such as cultural diversity and languages, etc for this cohort;
• Is likely associated, in part, with longer duration in education (good thing) and higher life-time cost of such education compared to labour markets returns on education (bad thing);
• Is reflective of lower employment rates and higher unemployment rates of this cohort across a number of European countries;
• Implies lower propensity toward family formation (a demographic time bomb of sorts);
• Suggests greater dependency costs for older generations of parents who (within ages of over 45) are simultaneously facing pressures to save for their own retirement;
• Implies lower investment and tax bases in the economies where this trend is more pronounced; 
• Likely correlates with higher cost (relative to income) of renting quality accommodation - a signal of reduced capacity of these economies to attract high quality human capital from abroad, thus reducing social and economic mobility not only for the country natives, but also across Europe as a whole, and so on…

All of which makes this map extremely significant in terms of identifying future potential for long-term economic development and growth in a number of European countries. And, frankly speaking, for any country with said percentage in excess of 20%, these prospects are not too great… 

Welcome to Europe's Generation Jinx...

13/9/15: Some Insightful Links on European Refugees Crisis

There has been a lot written about the migration crisis or refugees crisis or whatever one might choose to call the crisis on European borders. I am not about to add to the continuously expanding literature on the subject (at least not yet).

But here are a couple of links / summary data tables worth checking out.

First, an excellent essay in the Foreign Policy showing the extent of discontinuity between the Central European self-interest-driven humanitarian values of the 1990s and the region's current attitude toward migration.

But then again, Eastern and Central Europe has been re-writing its own history at will, on one occasion after another, to suit one master or the other, one nationalist leader or the next... here's a good reminder from earlier this month from one side, and the same view from another, both valid (by the way).

So here's a table of facts on European attitudes toward refugees, so hard to re-shape to suit a particular political narrative:

There is a neat summary of key issues behind the current crisis in the Vox but for all the facts and all the good discussions, the Vox article just can't get itself around to one topic - the role of the U.S. in all of this (and the role of the U.S. allies), so for the sake of not re-writing history, here's an alternative angle on that too.

And for all the headlines about the current crisis being the worst in European history since WW2... there's this handy chart from Globe & Mail:

Source: http://www.theglobeandmail.com/news/world/europes-migrant-crisis-eight-reasons-its-not-what-youthink/article26194675/

Nor is the problem tied into Syrian crisis alone as the following chart from the same Globe & Mail article shows:

Which leads to the conclusion. And an unpleasant one. Either the Schengen is going to go bust... or we are going to hear - pretty soon - a call for yet another *Genuine* Union, this time around a Genuine Migration Union or a Genuine Borders Union, for any solution to all European crises must always involve greater harmonisation of something.

13/9/15: Irenomics101: No One's an Island...

Remember all the jubilation over the EU milk quotas abolition? Ah, what a difference a few months and basic Economics 101 make...

And that Economics 101 lesson is: remove restrictions - supply goes up. Unless demand goes up as much, prices will fall. And demand... oh, that demand...

But, of course, Irish dairy farmers are 'cautious' and 'wise' and 'will gradually increase supply in response to demand'... And then there's another lesson to be learned: there is no such thing as 'collective caution' when it comes to commodities producers... so in July 2015, milk for human consumption supply in Ireland rose 8.4% y/y and butter production rose 20.8%. And in January-May 2015 (latest data available for EU-wide comparatives), milk intake by pasteurisers and creameries fell across the EU 0.1% and rose 6.3% in Ireland (second largest increase after Hungary, which has an intake of 638,000 tonnes of milk over that period against Ireland's 2,516,000 tonnes). In reality, things were even more 'cautious' on the side of Irish farmers - domestic (as opposed to imported) milk production rose 8.6% y/y in January-July 2015.

Just as domestic milk output prices fell 24.5% y/y in July 2015...

Which neatly brings us back to that original argument from the Irish industrial farming lobby - the one about 'cautious' increases being a buffer against price collapse... it is about as good as late Brian Lenihan's unfortunate argument that bank runs can't happen here, "Ireland being an island"...

11/9/15: 2Q 2015 National Accounts: Recovery on pre-crisis peak

In the first post of the series covering 2Q national Accounts data, I dealt with sectoral composition of growth. The second post considered the headline GDP and GNP growth data. The third post in the series looked at Domestic Demand that normally more closely reflects true underlying economic performance, and the fourth post covered external trade.

In this post, let us briefly consider per capita GDP, GNP and Domestic Demand.

Chart below shows cumulative four quarters per capita GDP, GNP and Domestic Demand based on the latest data for population estimates and the National Accounts through 2Q 2015.

As shown above, Final Domestic Demand on per capita basis was at EUR33,782, up 5.95% y/y in 2Q   2015, closing some of the crisis period gap. Still, compared to peak, per capita Final Domestic Demand is still 13.3% below pre-crisis peak levels in real (inflation-adjusted terms). In part, this is driven by the Personal Consumption Expenditure which, on a per-capita basis was EUR19,163, up 2.1% y/y in 2Q 2015, but down 8% on pre-crisis peak.

GDP per capita rose 5.3% y/y in 2Q 2015 to EUR42,106, down only 0.82% on pre-crisis peak. GNP per capita rose to EUR36,189 up 5.9% y/y and 1.49% ahead of pre-crisis peak.

CONCLUSIONS: With GNP per capita attaining pre-crisis levels back in 1Q 2015, the recovery from the crisis has been effectively completed in real terms in terms of GNP after 28 quarters. In GDP terms, we are now close to regaining the pre-crisis peak levels, with 30 quarters to-date at below the peak. However, recovery is still some distance away in terms of Final Domestic Demand per capita and in terms of Personal Consumption Expenditure. 

12/9/15: Russian Exports & Trade Balance for July

Central Bank of Russia released latest figures (for July 2015) covering external trade in goods. Here are some details.

Russian exports of goods (in US dollar terms) fell 40.15% y/y in July following a 25.6% drop in June. These are not seasonally-adjusted figures, so we can only do y/y comparatives. The drop was sharper for Russian trade with countries outside the CIS (down 42.35% in July) than with CIS countries (down 'only' 22.71%). This implies a reversal in June changes when exports to CIS countries fell more substantially than exports to non-CIS countries (-30.46% and -24.76% respectively).

Taking out some monthly volatility, 3mo average for Russian exports of goods were down 32.15% y/y in May-July, with distribution of declines pretty much even across both CIS and non-CIS states (-32.19% and -32.15%, respectively).

Russian imports of goods fell even more than exports in percentage terms. Russian imports of goods fell 41.87% in July in y/y terms, having previously posted a decline of 38.3% in June. 3mo average through July 2015 was down 40.19% y/y.

However, in level terms, declines in exports were sharper than declines in imports: 3mo average through July 2015 for exports was down USD14.04 billion against decline in imports of USD10.99 billion.

As the result, Russian trade balance (goods only) deteriorated sharply in July 2015, declining 37.21% y/y in July, having previously posted a relatively small decline of 1.24% in June. On a 3mo average basis through July 2015, trade balance in goods was down USD3.041 billion compared to the same period in 2014 (-18.66%). On 3mo average basis, trade balance with CIS was down marginally USD802 million in value terms, but sharply in percentage terms (-29.3%), while trade balance with non-CIS states was down sharply in both levels (USD2.24 billion) and in percentage terms (-16.5%).

As chart above shows, the contraction in July Trade Balance was very sharp. To see this, consider historical series for Russian Trade Balance in goods since January 2000:

July 2015 y/y decline in overall Trade Balance for goods ranks as the sharpest since July 2009 and 13th sharpest decline since January 2000.

CONCLUSIONS: Overall July drop in Russian Trade Balance (goods only) was driven primarily by lower energy (oil and gas) prices and deterioration in Ruble valuations (Ruble is down some 15% since July 1).

As a related note, as reported by Bloomberg earlier this month, despite another strong harvest, Russian exporters of wheat are being held out of the global markets by the Government measures aimed at curbing food inflation at home.

10/9/15: 2Q 2015 National Accounts: External Trade

In the first post of the series covering 2Q national Accounts data, I dealt with sectoral composition of growth, using GDP at Factor Cost figures.

The second post considered the headline GDP and GNP growth data.

The third post in the series looked at the Expenditure side of the National Accounts, and Domestic Demand that normally more closely reflects true underlying economic performance,

Now, consider extern trade.

• Exports of Goods and Services were up 13.56% y/y in 2Q 2015 previously having risen 14.17% y/y in 1Q 2015. Over the last 4 quarters, growth in exports of goods and services averaged 14.2% y/y.
• Most of growth in exports of Goods and Services is accounted for by growth in Goods exports alone. These rose 16.36% y/y in 2Q 2015 after rising 16.86% y/y in 1Q 2015. Average y/y growth rate in the last 4 quarters was 18.38%. In other words, apparently Irish exports of goods are doubling in size every 4 years. Which, of course, is simply unbelievable. Instead, what we have here is a combination of tax optimisation by the MNCs and effects of currency valuations on the same.
• Exports of Services also grew strongly in 2Q 2015, rising 10.34% y/y, having previously grown 10.94% in 1Q 2015 and averaging growth of 9.94% over the last 4 quarters. Again, these numbers are beyond any reasonable believable uptick in real activity and reflect MNCs activities and forex valuations.
• Imports of Goods and Services rose 16.9% y/y in 2Q 2015, an increase on already fast rate of growth of 15.46% in 1Q 2015. Unlike exports side, imports side of goods and services trade was primarily driven by imports of services which rose 21.8% y/y in 2Q 2015 (+20.7% y/y on average over the last 4 quarters) as compared to 9.0% growth y/y in imports of goods (+13.5% y/y on average over last 4 quarters).

As the result of the above changes,

• Trade Balance in Goods and Services fell in 2Q 2015 by 1.8% y/y, having previously recorded an increase of 7.4% y/y in 1Q 2015. Combined 1H 2015 trade balance is now up only EUR399 million on same period 2014 (+2.26%).
• Trade Balance in Goods registered 26.9% higher surplus in 2Q 2015, and was up EUR6.206 billion in 1H 2015 compared to 1H 2014 (+28.4%). Trade Balance in Services, however, posted worsening deficit of EUR5.584 billion in 2Q 2015 against a deficit of EUR2.174 billion back in 2Q 2014. Over the 1H 2015, trade deficit in services worsened by EUR5.806 billion compared to 1H 2014 (a deterioration of 136% y/y).

CONCLUSION:

1. Irish external trade continued to show strong influences from currency valuations and MNCs activities ramp up, making the overall external trade growth figures look pretty much meaningless. 
2. Overall Trade Balance, however, deteriorated in 2Q 2015, which means that external trade made a negate contribution to GDP growth. 
3. Over the course of 1H 2015, the increase in overall Irish trade balance was relatively modest at 2.26% with growth in goods exports net of goods imports largely offset by growth in services imports net of services exports.

Stay tuned for more analysis of the National Accounts.

10/9/15: 2Q 2015 National Accounts: Domestic Demand

In the first post of the series covering 2Q national Accounts data, I dealt with sectoral composition of growth, using GDP at Factor Cost figures.

The second post considered the headline GDP and GNP growth data.

Here, let's consider the Expenditure side of the National Accounts, and most importantly, Domestic Demand that more likely reflects true underlying economic performance, removing some (but by far not all) tax activity by the MNCs.

As before, I will be dealing with y/y growth figures throughout the post.

Remember: Final Domestic Demand is a sum of Personal Expenditure, Government Expenditure, and Gross Fixed Capital Formation. Adding to that change in stocks gives us Total Domestic Demand, while adding net exports to Total Domestic Demand and subtracting outflows of factor payments to the rest of the world gives us GDP.

• In 2Q 2015, Personal Expenditure on Goods and Services rose 2.83% y/y, having previously risen 3.71% in 1Q 2015. The rate of growth in 2Q 2015 was, therefore, slower than in 1Q, but faster than in 2Q 2014 (2.28%). Overall, Personal Expenditure added EUR599 million to the economy in 2Q 2015 compared to the same period in 2014, a drop in positive contribution from EUR784 million added in 1Q 2015. Nonetheless, the figures for Personal Expenditure are healthy.
• Net Expenditure by Government on current goods & services rose 1.73% y/y in 2Q 2015, which marks a slowdown on 5.45% rate of growth recorded in 1Q 2015. Rate of growth recorded in 2Q 2015 was also lower compared to 2Q 2014 when Government expenditure rose 3.92% y/y in real terms. This marks 2Q 2015 as the first quarter since 1Q 2013 in which Government expenditure rose slower than Personal expenditure.
• Gross Domestic Fixed Capital Formation posted a massive 34.2% rise y/y in 2Q 2015, compared to already rapid growth of 9.2% recorded in 1Q 2015. It is worth noting that these figures include investments by MNCs tax-registered in Ireland (e.g. tax inversions et al) and vulture funds and other foreign investors' purchases of domestic assets. Over the last 4 quarters, Gross Domestic Fixed Capital Formation growth averaged 18.44%. This line of expenditure contributed EUR2.977 billion to GDP growth in 2Q 2015 and in H1 2015 total contribution was EUR3.781 billion.
• As the result of the above, Final Domestic Demand rose 10.07% y/y in 2Q 2015 - a massive rate of increase, especially compared to 5.34% growth recorded in 1Q 2015 and 6.4% growth recorded in 2Q 2014.

However, despite all the Nama sales and vultures investments, tax inversions and organic growth, Irish Final Domestic demand remains below the levels attained prior to the crisis, albeit the gap is now at only 5.62%:

Chart below shows the extraordinary uplift in Gross Fixed Capital Formation:

We have no idea what drove this uptick, but were Gross Fixed Capital Formation growth running at 1Q 2015 pace in 2Q 2015, this line of expenditure contribution to GDP would have been EUR2.175 billion lower, and overall GDP growth would have been less than 2.1% y/y instead of 6.7%. This just shows how volatile Irish figures are and how dependent they can be to a single line change of unknown nature.

CONCLUSIONS: 

1. Overall, Irish economy posted moderate growth in Personal Expenditure and Government Expenditure in 2Q 2015. Slightly negative news is that growth in 2Q 2015 was slower in these two categories than in 1Q 2015.
2. Gross Fixed Capital Formation posted an unprecedented rate of increase y/y rising 34.2% in 2Q 2015. There is absolutely no clarity as to the sources or nature of this growth, especially considering that traditional investment areas of Building & Construction have been growing at just 1.5% y/y in 2Q 2015. Stripping out growth in this area in excess of 1Q 2015 already rapid expansion would have generated much lower, more realistic growth figure for GDP and for Domestic demand.
3. Final Domestic Demand expanded strongly on foot of Fixed Capital Formation, rising 10.1% y/y in 2Q 2015 almost double the 5.3% rate of growth recorded in 1Q 2015.
4. One area of potential concern is the impact on Domestic Demand (via Gross Fixed Capital Formation) from the MNCs activities via MNCs inverted into Ireland. There are multiple examples of such inversions across various sectors all having potential implications on how we treat investment by such firms in National Accounts. Another area of concern is treatment of capital investments by some financial firms, such as aircraft leasing firms and, increasingly, vulture funds and REITS.

Analysis of external trade flows is to follow, so stay tuned.

10/9/15: 2Q 2015 National Accounts: GDP and GNP Growth

In the previous post covering 2Q national Accounts data, I dealt with sectoral composition of growth, using GDP at Factor Cost figures.

Here, consider the headline GDP and GNP growth data.

First, year on year figures:

• As noted earlier, GDP at factor cost rose 6.52% y/y in 2Q 2015, having previously expanded 6.77% y/y in 1Q 2015. This means that sectoral growth slowed down slightly in 2Q 2015 compared to 1Q 2015, although the slowdown was not very large. Still 2Q 2015 growth was faster than 2Q 2014 growth (6.31%). These are good news. In 2Q 2015, GDP at constant factor cost contributed EUR2.833 billion to overall GDP and over the course of 1H 2015 cumulative y/y contribution was EUR5.576 billion.
• Taxes rose 5.13% y/y in 2Q 2015, having previously grown at 8.06% y/y in 1Q 2015. There is quite a bit of seasonal and within-year timing variations in these series, so we can look at 1H 2015 effects instead. 1H 2015 cumulative taxes contribution to GDP was EUR687 million, which EUR995 million contribution over 1H 2014.
• Subsidies made a positive contribution to GDP growth (or rather - less negative) in 1Q 2015 of EUR58 million, followed by a positive contribution in 2Q 2015 at EUR83 million. Overall, subsidies reduction (subsidies enter as negative into GDP) was EUR141 million in 1H 2015 compared to 1h 2014a swing of EUR321 million in terms of GDP growth in 2015-2014 compared to 2014-2013 periods.
• GDP at constant market prices rose 6.67% y/y in 2Q 2015, down on 7.17% growth recorded in 1Q 2015. So GDP growth was fast in 2Q, but slower than in 1Q. Surprisingly, to some media observers, GDP growth in 2Q 2014 was also higher at 7.0% as compared to 2Q 2015.
• Outflows of profits abroad (MNCs expatriation net of Irish companies repatriation of profits from abroad) jumped in 2Q 2015, moderating overall GNP growth. In 2Q 2015, net factor income for the rest of the world reached EUR8.039 billion compared to 1Q 2015 at EUR7.383 billion and 2Q 2014 at EUR7.013 billion (more on this later).
• As the result, Irish GNP at constant market prices grew strong 5.28% y/y in 2Q 2015, which is nonetheless well below 8.07% growth recorded in 1Q 2015 and below blisteringly high rate of growth of 10.71% recorded in 2Q 2014. Over 1H 2015, GNP expanded by EUR5.2 billion compared to H1 2014, but this growth was slower than the rate of growth recorded in H1 2014 compared to H1 2013 (+EUR5.469 billion).

Again, given markets' surprise at Irish growth (compared to market expectations), here is a chart with a simple polynomial trend in GDP and GNP growth rates:

As chart above shows, both GDP and GNP growth surprised to the downside on trend, not to the upside. Which, again, begs a question: what models are being used to forecast Irish economic performance?

Now, consider GDP/GNP gap:

In 2Q 2015 GDP/GNP gap in Ireland stood at 18.95% - the highest since 2Q 2013 and well above the period average, as illustrated in the chart above. Net factor income outflows ratio to GDP was 15.94% - also the highest reading since Q2 2013. Both, higher gap and higher ratio signal (imperfectly) MNCs activity acceleration built into Irish growth figures, albeit we cannot connect these gaps to specific quarter when activity was actually registered.

Table below summarises y/y growth rates in 2Q 2015 and 1H 2015:

Table below summarises q/q growth rates in 1Q 2015 and 2Q 2015, as well as 2Q 2014:

Summary:

• GDP at constant prices rose 1.87% q/q in 2Q 2015 which marks a marginal slowdown on 1Q 2015 growth of 2.13%. 
• GNP at constant prices rose 1.91% in 2Q 2015 compared to 1Q 2015, reversing the loss of 0.17% recorded q/q in 1Q 2015. Which is also a good outrun.
• In annual growth terms, however, both GDP and GNP came in with slower growth y/y in 2Q 2015 than in 1Q 2015. That said, growth in GDP was very high at 6.67% y/y and growth in GNP was solid and more realistic 5.28% y/y,
• Headline figures, therefore, reflect strong performance, but as noted in the previous note, much of this performance is driven by MNCs-dominated sectors activity.

Stay tuned for the expenditure side of the National Accounts in a later post.

10/9/15: 2Q 2015 National Accounts: Sectoral Growth Analysis

So Irish National Accounts data for 2Q 2015 was released today. Brace yourselves for series of blog posts here and a torrent of congratulatory waffle across the media.

Starting, as I always do, with sectoral composition of growth, using GDP at Factor Cost figures. All referenced here are in real terms (inflation-adjusted) and seasonally unadjusted so we can look at what matters most: annual rate of growth (y/y).

And we are off:

• Agriculture, Forestry and Fishing sector contribution of GDP in 2Q 2015 was EUR1.341 billion (yeah, that's right… just that much). And this figure represents a decline of 1.18% y/y. Ugh… growth it ain't. But good news is, sector output grew 5.57% y/y in 1Q 2015, so for the year to-date we are still up cumulative EUR32 million in the sector (+1.44%). Still, a year ago in 2Q 2014 the rate of growth in the sector was 23.8%.
• Industry (inclusive of Building & Construction) output contribution to GDP was EUR13,711 billion. Aha… more than ten times that of Agriculture Forestry & Fishing sector. But never mind, we don't call Ireland the Widgets Island… So the sector grew 4.36% y/y in 2Q 2015 which adds to 10.52% growth in 1Q 2015. Healthy numbers all even though 2Q was a slowdown. And a year ago, in 2Q 2014 things were even more heated - then sector grew at 14.7% y/y. But 1H figure is pretty healthy all around: up EUR1.739 billion in 1H 2014 (+7.18%).
• Take some decomposition of growth in Industry. Transportable Goods Industries and Utilities sub-sector (aka Pharma MNCs Central) grew at a hefty rate of 11.2% in 1Q 2015 and this fell to 4.64% y/y growth in 2Q 2015. Again, sub-sector growth was weaker in 2Q 2015 than in 2Q 2014 (+14.71% y/y). However, Transportable Goods Industries sub-sector was the biggest contributor to growth in 2Q 2014 of all Industries, but more on this below. Meanwhile, Building & Construction sub-sector expanded by 4.41% in 1Q 2015 and this sub-sector managed to grow only 1.52% in 2Q 2015. For all the ink expended by irish media pushing revival of the Construction sector stories in recent months, 1H 2015 cumulative y/y growth in the sub-sector was just EUR64 million (+2.87%). Still, growth is growth, right? 
• Distribution, Transport, Software and Communications sector (aka non-Pharma MNCs Central) was the booming one this quarter. In 1Q 2015 this sector expanded output by 9.64% and in 2Q 2015 this rose to 11.40% y/y. Yes, folks, things are doubling in this sector faster than every 7 years (pretty soon, all Beemers in the world will be made in Drogheda and all Mercs will be stamped out in Wexford). Back to numbers: this sector is now almost as large as the entire Industrial sector in Ireland at EUR12.398 billion 2Q 2015 contribution to GDP. Over 1H 2015 the sector added EUR2.335 billion in growth to the GDP, more than any other sector in the economy and its output was up 10.52% y/y.
• Public Administration and Defence sector continued to shrink in 2Q 2015, falling 4.05% y/y after having posted a 5.45% contraction in 1Q 2015. The sector managed to subtract from GDP growth some EUR147 million (-4.74%) y/y over 1H 2015.
• Other Services, including rents, sector was up steady 4.35% y/y in 2Q 2015 having previously grown 4.42% y/y in 1Q 2015. Over 1H 2015, compared to 1H 2014, the sector contribution to GDP expanded by EUR1.48 billion (+4.39%).

Here is a chart illustrating evolution of GDP art Factor Cost:

The above shows that GDP at factor cost grew by 6.52% y/y in 2Q 2015 down slightly on 6.77% growth in 1Q 2015, but still fast. GDP at factor cost expanded by EUR5.576 billion in 1H 2015 compared to 1H 2014 (+6.64%). Very fast. Which is good news.

Trends are illustrated in the chart below:

As chart above shows very clearly, level of GDP at factor cost came in as a slight surprise above the simple polynomial trend line, but growth rate in GDP has both moderated in 2Q 2015 compared to 1Q 2015 and came at below the trend line. Which begs a question: what are all those analysts who underestimated GDP growth use for a model?.. But never mind - forecasting Irish economy is a hazardous task.

Now, here's an interesting bit:

As the chart above shows, lion's share of growth in 2Q 2015 came in from the MNCs-dominated sectors:

• Industry (ex-Building & Construction) contributed almost 1/5 of the entire growth
• Distribution, Transport, Software and Communications sector (aka non-Pharma MNCs Central) contributed whooping 45%; and
• Other Services contributed 26%.

Everything else mattered not.

The same picture, pretty much, holds for 1H cumulative growth contributions:

Summary: so what has been happening over 2Q 2015 and 1H 2015? 

1. Yes, we have growth and fast growth at it. Mostly, it is broadly-based across various sectors. 
2. But dominant sectors that act as two leading (by a mile) sources of growth are  Industry (ex-Building & Construction) dominated by Pharma and Chemicals, plus Distribution, Transport, Software and Communications sector, dominated by non-Pharma MNCs. Interestingly, last year, 1H 2014 growth y/y involved much shallower expansion of output in Distribution Transport Software and Communication sector (+4.62% against this year's +10.53%), which possibly signals amplified tax optimisation and exchange rates effects of MNCs activities in the sector. 
3. Growth was much stronger in domestic sectors a year ago than in 1H 2015: Agriculture (+20.87% y/y in 1H 2014 against +1.44% in 1H 2015) and Building & Construction (+12.5% y/y in 1H 2014 against +2.87% y/y in 1H 2015) sectors.
4. Y/Y 2Q 2015 growth was slower than 1Q 2015 across all sectors other than Distribution, Transport, Software and Communications sector. Annual contraction rate moderated slightly in Public Administration sector in 2Q 2015 compared to 1Q 2015.

We can't say much about quality of growth beyond that... But stay tuned for more detailed analysis of National Accounts data later.

10/9/15: Building & Construction: 2Q 2015 y/y & historical compratives

Having looked at the relationship between PMI and actual activity in Irish Building and Construction sector in the previous post, now, let's take a closer look at the CSO series for actual activity in the sector.

As a starter, consider the current consensus view of the ongoing strong recovery in the sector.

All data not seasonally adjusted, so we are looking at y/y changes here.

First in terms of Volume of Production (excluding inflationary effects):

• Total volume index for production in Building & Construction sector in Ireland was at 106.0 in 2Q 2015. This represents a rise of 8.72% y/y, second strongest increase in last 4 quarters. Compared to 1H 2011 the index is up 39.47%, seemingly confirming the overall story of strong recovery. However, the problem is that this recovery has been off horrific lows. Compared to series peak, activity in the sector was still 72.9% lower in 2Q 2015, and current levels of Building & Construction volumes are 53.7% below their 2Q 2000 levels. For the sake of another comparative, today's reading of 106 compares to 2000-2001 average reading of 234.6.
• Residential Construction volume index stood at 112.6 in 2Q 2015, up massive 45.7% y/y, and up 58.9% on 1H 2011. Again, levels of activity are still weak: the index is still down 88% on pre-crisis peak and is 77.7% below 2Q 2000 reading.
• Non-residential building volume index reached 113.3 in 2Q 2015, up 7.9% y/y and 26% ahead of 1H 2011. The index is still down 41.4% on pre-crisis peak and activity in non-residential building sub-sector is 33.4% below 2Q 2000 reading.
• Civil engineering is the only sub-sector of the Building & Construction sector that is posting activity above 2000 levels. Current index at 92.6 for 2Q 2015 is, however, marking a decline in activity compared to 2Q 2014 (down 14% y/y). Compared to peak activity, the index is 43.9% lower today, but it is 16.2% ahead of activity registered in 2Q 2000.

Now, in terms of Value of Production (including inflation):

• Total value index for production in Building & Construction sector stood at 107.1 in 2Q 2015, up 9.85% y/y, marking, once again the second highest rate of growth in the last 4 quarters. The index is still 71.3% below its peak reading, and is down 34.6% on 2Q 2000. Current reading of 107.1 is well below 2000-2001 average of 177.2.

Chart to illustrate:

Conclusions: overall, the recovery rates in the sector have been driven (to-date) by the low base from which the recovery is taking place. Double-digits growth is hardly inspiring when it happens in an environment where actual levels of activity are massively below where they were 15 years ago. That said, growth is better than contraction. 

10/9/15: Building & Construction: 2Q 2015

Production indices for Building & Construction sector in Ireland, covering 2Q 2015, were out yesterday. Here is the run through the numbers:

All building & construction sector activity by volume rose to 106.2 in 2Q 2015, up 5.46% q/q and 7.16% y/y (I am using seasonally-adjusted basis numbers here).

Much of this increase was down to a 8.78% rise in Building ex-Civil Engineering, which was itself primarily driven by a 14.6% q/q uplift in Residential Building.

Two charts, showing links to Construction sector PMIs:

Charts above illustrate continued decoupling in trends between PMIs-signalled growth and actual activity in the sector. While PMIs have signal strong expansion, the rate of growth in actual activity has been much more modest. As the result, negative correlation between PMIs and CSO index has moderated, but it remains negative on a historical basis.

9/9/15: MSCI World EV/EBITDA ratio: Happy Bubbly

In the lightness of being inhabited by the world's investors, no valuation is a bubble, until it is officially declared to not be a bubble. And so it has been since the start of the year, just as EV/EBITDA (Enterprise Value ratio to Earnings before interest, tax, depreciation and amortisation) ratio of MSCI World Index for 23 Developed Markets economies peaked at levels ahead of all previously recorded ones:

Source: @zerohedge

But never mind, for that promised growth rebound is just around the corner... where it has been for the last seven and a half years... just one period ahead forecast from today...

Note: h/t and thanks to Rouben Indjikian for spotting EBITDA definition missing reference to interest.