The latest National Accounts showed that the Irish economy grew for a second successive year in 2012, with GDP +0.9% and GNP +3.4%. This was ahead of our estimates (+0.4% and no change respectively). We have made a number of small changes to our forecasts on the back of that and other recent economic releases, but these net out to leave our headline GDP growth forecast of +1.2% in 2013 unchanged, while the GNP estimate sees a minor uplift to +1.0% from the previous +0.9%.
Turning to the housing market, in spite of a relatively weak start to the year the Residential Property Price Index still shows that residential prices are falling at their slowest pace since March 2008. Our recent ‘Irish Housing: Stabilisation Once Again’ piece, which we summarise in this month’s Monitor, argued that a two-tier outlook for prices was likely, with Dublin and its surrounding areas poised to outperform other markets. Indeed, this two-tier outlook was reflected in the RPPI data as Dublin prices are +3% y/y while the rest of the country remains in negative territory (-6% y/y).
On the consumer side, core retail sales remained in positive territory on an annual basis for a sixth successive month in January. We are due to get data for February later today. Consumers saw continued respite on the pricing front, with the annual rate of inflation slowing to 1.1% in January. Elsewhere, the latest Quarterly National Household Survey confirmed that the private sector added to headcounts throughout the second half of last year.
Irish PMIs remained resilient, with the NCB Manufacturing PMI reading pointing to a 12th successive month of growth for the sector, while the NCB Services PMI reading was above the 50 ‘no-change’ level for a seventh straight month. Other indicators showed signs of pressure for some private sector firms, with the trade deficit narrowing and industrial production declining in January.
All of the listed banking stocks released full-year 2012 results during the month. Bank of Ireland, AIB and PTSB reported good work on the capital and funding fronts, while net interest margins for the sector as a whole look to have been at an inflection point at the end of last year. However, significant challenges remain in terms of tackling arrears and cost take-out for the sector.
All in all, the above reflects another month of progress for the Sovereign, particularly on the funding front, while the overall outlook for the economy remains encouraging despite the external headwinds. To download our latest Irish Economy Monitor please visit this link: www.ncbresearch.com/PDF_Archive/2013-03/IrishEconMonitorMar2013.pdf