independent

Sunday 20 April 2014

... So why do we still feel broke?

Q: The economy's growing again? You must be joking. How come I'm feeling poorer than ever?

A: One of the features of the economic recovery almost everywhere in Europe has been the long time it takes for economic growth to start to trickle down to the population as a whole.

Still, somebody must be feeling better than they used to because consumer spending is one of the main reasons that the economy grew so quickly in the third quarter.

Are you sure you're not spending a little bit more than you used to? A few more ice creams during those warm summer months?

Q: Come to think of it, I did buy a pair of shorts for the sun and the odd ice cream, but surely that was not enough to push up gross domestic product by 1.5pc?

A: Consumer spending accounts for half of the GDP so this kind of spending is important, but the figures show that construction spending and investment is also booming.

The construction sector is 15pc bigger than it was in the same quarter last year.

Admittedly that was off a low base but it makes you think.

There's a lot of building in the capital these days as the commercial property sector takes off again. The rise in investment by companies is also good news; it means companies are finally spending again because they are optimistic about the future. That means more jobs.

Q: So everything is hunky dory? I can max out the credit card and have a really good Christmas?

A: Not quite! Quarterly figures for the economy can be a little bit erratic.

Exports can rise and fall due to things like drugs going off patent and this has knock-on effects on GDP.

While the growth recorded in the third quarter is strong, we need to see a few more quarters like this before we can be sure that the economy is on fire.

There was undoubtedly a pick-up in the summer months and we can see this in the sharp and sustained fall in unemployment, but the recovery will still take years.

Q: What are the experts saying?

A: That depends on who you listen to. The foreigners still tend to be a bit gloomy while the home-grown types are optimistic.

Q: What are those foreigners saying when they are not writing stories about us eating pigeons?

A: Well, the International Monetary Fund warned yesterday that there is still way too much public and private debt and reminded us that the health service is still a shambles. The rating agencies are also pretty unhappy.

Q: Phew! I think I'll listen to the locals for a change. What are they saying?

A: The usually cautious Economic and Social Research Institute (ESRI) began a report this week with the words that we have turned a corner.

Both the ESRI and Ibec, which represents most of the country's big companies, think we are going to have growth of something close to 3pc next year, which would be the best growth in six or seven years.

Irish Independent

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