Monday 23 September 2019

Economy buoyant but showing no signs of froth, says Goodbody

Dermot O’Leary of Goodbody
Dermot O’Leary of Goodbody

David Chance

The economy is growing at its fastest pace since 2006 and while Brexit will hit goods and services exports, the country has emerged as the most popular destination for companies looking for a post-breakup base in the European Union, Goodbody Stockbrokers said in a report.

The investment house said the economy's gross domestic product would grow 5.9pc this year and by 3.3pc in 2019 and that unemployment would fall this year to 5pc, close to the average levels of the boom years.

"The current level of savings does not suggest that consumers are spending beyond their means. Growth is buoyant but showing no signs of froth," said Goodbody chief economist Dermot O'Leary.

The big unknown is the terms of Britain's divorce from the European Union, where negotiations are bedevilled by disagreement over a backstop for Northern Ireland.

UK prime minister Theresa May is looking to patch together a deal that she can sell to her Unionist coalition partners and hard-liners in the Conservative Party, as well as one that reassures Dublin that there will be no return to a "hard border" with the North.

Offsetting this to some extent is a surge in firms based in Britain rebasing here to retain access to the single market.

"Indeed, there is already evidence that Ireland is becoming the most popular destination for firms looking for an EU base in the post-Brexit world," Mr O'Leary said

As the economy grows, however, it will start hitting constraints - with wages set to rise. In addition, new housing is still desperately needed and even with supply growing by a quarter this year it needs to double again to meet demand, especially in the affordable sector, Goodbody noted.

"Recent population trends suggest that a minimum of 35,000 units are needed per annum, thus there remains a long way to go in the recovery," Goodbody said.

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