Monday 21 August 2017

2016 'a year of two halves for Irish economy' - Investec

Taoiseach Enda Kenny. Photo: AFP/Getty Images
Taoiseach Enda Kenny. Photo: AFP/Getty Images
Michael Cogley

Michael Cogley

2016 has been deemed as 'a year of two halves' for the Irish economy, according to Investec analysts Philip O'Sullivan and Ronan Dunphy.

Britain's decision to leave the European Union acted as a bookmark for a year that has seen a sharp drop off in the rate of expansion since the June referendum.

However, it is believed the worst of the immediate pressure from the vote has passed with the October Investec Manufacturing and Ulster Bank Constriction PMIs reporting their fastest growth for four and seven months respectively.

The latest services PMI is also comfortably ahead of the contraction mark, with a reading of 54.6.

Investec said core domestic demand, up 5.5pc in the first half of the year, has been the stand-out performer this year. Labour earnings, employment levels, and retail sales all showed signed of momentum in the second half of the year.

"Due to this momentum and the more uncertain external backdrop, our expectation remains that the domestic economy will remain the main driver of growth over the forecast cycle.

"We have tapered our headline GDP growth forecast to 3.4pc for 2017 and 3.2pc in 2018, which represent downgrades of 10bps for both years. Despite these downgrades, Ireland is still on course to outperform most of its European peers," the pair said in a note this morning.

At the start of the year Investec predicted the minority Government wouldn't survive to the end of the year, something they deemed as "wide of the mark".

"Our sense is that the parliamentary arithmetic still counts against this administration’s longevity. However, any fresh election would be unlikely to result in meaningful policy changes."

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