Thursday 15 November 2018

Labour market remains a key source of good news for Ireland – Investec

Rising employment and wage growth should deliver another good year for the retail sector in Ireland. Stock Image
Rising employment and wage growth should deliver another good year for the retail sector in Ireland. Stock Image
Ellie Donnelly

Ellie Donnelly

The labour market in Ireland remains a "key source" of good news for the country, according to the latest Irish economy quarterly monitor from Investec.

Last year total employment rose by 2.9pc, and is now just 1pc below the peak reached during the Celtic Tiger period.

The employment component of the purchasers managers index (PMI) suggest that labour market conditions should continue to tighten in 2018, which should apply further upward pressure on wages, Investec said.

Rising employment and wage growth, allied to muted overall inflationary pressures, should deliver another good year for the retail sector in Ireland.

However, the specialist bank warned that headline retail sales are still being dampened by sterling pressure on the motor trades, with new car sales down almost 3pc year-on-year so far this year.

The PMIs also point to a sharp rate of expansion in the economy, however not quite at the same “blistering” pace seen at the end of 2017, Investec said.

The bank warned that the most pressing issue in the country remains a chronic lack of housing.

Official completions were 19,271 units in 2017, up 29pc year-on-year, however this is still well adrift of even the low end of the range of estimates for new household formation in Ireland (30,000 – 50,000 per year), according to Investec.

"We have nudged up our completions forecasts for 2018 to 21,500 from 21,000 and 2019, to 24,000 from 23,000, but the key message here remains that it will be a number of years before output can meet the flow of new demand," Philip O’Sullivan, economist with Investec, said.

"To this end, we continue to foresee strong house price growth. The narrative is, unsurprisingly, similar for the rental market, although rent caps in the key urban centres will see a slower build in rents."

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