Ulster Bank trims growth estimates as consumer concern rises
ULSTER Bank has cut back on its growth forecasts for this year and next as concern grows about the world economy.
Ulster Bank economist Simon Barry said yesterday he expected gross domestic product to rise just 0.3pc this year. He last predicted expansion of 0.5pc and growth four times the new level at the start of the year.
Gross national product, often seen as a better measure of the Irish economy, is seen contracting 0.8pc this year.
The economist lowered his forecasts as a slew of figures published yesterday suggested that the housing market is fragile with consumers continuing to keep spending in check.
Figures, including the monthly Exchequer returns and new manufacturing data, due to be published towards the end of the week are likely to give an up-to-date economic snapshot.
"It looks as if Ireland faces a more sluggish international growth environment," Mr Barry said. "The outlook for the labour market is for continued weakness, with employment levels expected to fall further during the remaining months of this year. If people are out of work, they have less money to spend."
The latest retail sales figures, published after yesterday's Ulster Bank report, showed overall sales were down but posted a pick-up in core retail sales which exclude cars.
While the figures gave some cheer to analysts, most warned it was too early to draw any consolation from the upward trend.
Bloxham Stockbroker's Alan McQuaid said spending was set to fall as taxes rise. "Consumer spending is likely to maintain the downward trend of recent years with declining real disposable incomes being the main driver. All in all, personal spending on goods and services is expected to fall in real terms for the fourth year running in 2011," he warned.
The economist sees consumer spending falling 2.5pc this year and staying flat or falling again next year. Ulster Bank's Barry is even more pessimistic. He sees consumer spending dropping another 3.1pc this year, with a decline of 0.4pc next year.
The biggest reason for Barry's downgrade of his own economic forecasts is the international economy, which is stumbling in the UK, US and Germany.
Despite these challenges, Barry does not predict a new global recession. "An outright double-dip does not appear the most likely scenario at this stage," he said, citing strong corporate balance sheets and "extremely accommodative monetary policy settings".