Quarterly Economic Commentary, Autumn 2004

September 24, 2004

News

24/09/2004

 

Quarterly Economic Commentary, Autumn 2004

By Daniel McCoy, David Duffy, Adele Bergin, Joe Cullen, Shane Garrett.

Embargo Friday 24th Sept., 00:01 am



Some of the main findings of the analysis include:

 

 

  • Strong growth conditions prevail within the Irish economy as indicated by robust employment trends. Economic activity is anticipated to rise by 5.2 per cent in 2004 as measured by real GDP and by 4.8 per cent in real GNP terms. Our forecast is for a continuation of this solid growth performance in 2005 at rates of 5.4 per cent in real GDP terms and 5.0 per cent in real GNP terms.
  • Despite the significant number of job losses within certain sectors, labour market conditions continue to improve with the unemployment rate expected to average 4.4 per cent in 2004 and 4.3 per cent in 2005. A tighter jobs market is expected to underpin wage growth contributing to an anticipated rise in consumer price inflation of 2.2 per cent this year and 2.4 per cent next year.
  • While the effect of higher oil prices is expected to have ratcheted up inflation temporarily, it is not expected to have a significant long-term impact on price changes. While the impact of higher prices will dampen economic activity somewhat, the fact that it has occurred against the backdrop of favourable world economic conditions means that its output effect will be muted.
  • The record number of house completions in recent years looks set to be surpassed in 2004. This expansion directly constitutes nearly one-fifth of the economy’s output growth for both this year and last. The ability to maintain this extent of volume growth in the housing market would appear improbable and any future reversal would negatively affect economy wide growth.
  • The scale of the monies involved with the SSIAs, in the order of 10 per cent of national income, could have a significant macroeconomic impact when the scheme expires. However, given both the uncertainty of how the funds will be divested and the position in the economic cycle when they mature, it is not sensible to motivate a continuation of such an expensive scheme by appealing to a perceived need for active macroeconomic demand management.

A Press Briefing will be held at the ESRI on THURSDAY September 23rd at 11:00a.m.