Dáil Éireann Debate, Thursday - 29 September 2016
93. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied that all economic indicators remain stable and consistent with requirements; and if he will make a statement on the matter. [28004/16]
Amharc ar fhreagraRecent indicators have generally been positive, indicating that the economic recovery is continuing in a sustainable manner.
GDP grew by 4.1 per cent in the second quarter of this year on an annual basis. This follows on from annual growth of 3.9 per cent in the first quarter.
Importantly, economic activity is now more balanced between domestic and external sources of growth. While the recovery in economic performance was initially led by the export sector, domestic demand is now making a strong contribution with personal consumption up 3.5 per cent in the first half of this year on an annual basis.
The economic recovery is most clearly evident in the labour market. Employment grew by 2.9 per cent (+56,200) over the year to Q2 2016, the fifteenth successive quarter of employment growth. The increase in employment remains broad based with gains recorded in 12 of the 14 sectors reported by the CSO.
Recent data published indicate that the volume of retail sales increased by 5.2 per cent year-on-year in August 2016. Core sales (excluding motor trades) were up by 4.1 per cent over the same period. New cars licensed for the first time were up 20 per cent to end-August year-on-year. Expansion in the construction sector continued in August with the Purchasing Managers' Index for the sector recording its thirty-sixth successive month of expansion. The Consumer Sentiment Index recovered most of July's post-Brexit fall as it rose to 102.7 in August 2016, from 99.6 in July. The index remains well above its long run average. The seasonally-adjusted monthly unemployment rate for August was 8.3 per cent, down from 9.1 per cent in August 2015. As a result, the unemployment rate has fallen by almost 7 per cent since its peak of over 15 per cent in early-2012.
However, there are several sources of uncertainty including the UK's decision on EU membership to which the Irish economy is particularly exposed. In the short-term, the increased uncertainty and volatility in the financial markets could undermine confidence while the depreciation of sterling has led to a loss of competitiveness.
In addition, weaker than expected trading partner growth would negatively impact on Irish growth through reduced exports. Growth in Emerging Market Economies (EMEs) disappointed in 2015, and there are concerns regarding the growth transition in China. EMEs have been an important growth engine in recent years, and while Ireland's direct trade exposure remains relatively small, the Irish economy would be exposed to a more generalised slowdown in the world economy.
Domestically, the high level of private debt, while falling, remains a concern, and any deterioration in the external environment could prompt households and firms to raise the pace of deleveraging, with adverse implications for domestic demand.
This uncertainty highlights the importance of prudent management of the public finances and of competitiveness-oriented policies that would help the Irish economy to weather any global economic downturn that may emerge.
In summary, I am satisfied that the economic indicators remain stable although the full impact of the UK's decision is yet to be seen. In this regard it is critical that appropriate polices are implemented and that is what the Government intends to do.
