Davy upgrades GDP growth forecast for 2020 to 5.5%

Stockbrokers Davy have revised upwards their GDP growth forecast for 2020 to 5.5% from 4.1% previously.

Davy said the upgrade came on the back of strong foreign direct investment, expansion in the multinational sector and an exceptional export performance.

The new forecasts puts Davy well above official projections including the Central Bank’s estimate of 4.3% and the Department of Finance’s forecast of 3.9%. 

The stockbrokers also revised upwards their forecast for Irish GDP growth in 2019 to 6.2% from 5%
previously.

In its latest Irish Economist forecast, Davy said that exports are set to grow by 11% in 2019 and 7% in 2020, due to continued strong foreign direct investment levels. 

Davy also said it expects consumer spending to grow by 3.2% in 2020 and employment by 2.5%, with the
unemployment rate falling to 4.4% and the Budget surplus growing to 0.8% of GDP.

On Brexit, Davy said that the UK’s planned departure from the European Union uncertainty depressed the Irish indigenous economy in 2019.

The stockbrokers noted that about 50% of SMEs postponed investment plans and the pick-up in liquidity in the housing market was delayed. 

It also said that non-residential construction slowed sharply last year, with output in the distribution, transport and tourism sectors flat on the year. 

“Now that a no-deal Brexit cannot occur in 2020, we expect output in indigenous sectors to grow by 3.5% in 2020, slightly faster than the 3% in 2019,” Davy said.

It also said it expected house price inflation to rise slightly to 2% during 2020 from 1% in 2019. 

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Mortgage holders benefit from – and need – advice, says ESRI

The Economic and Social Research Institute has found that mortgage holders can get a better deal when they read independent advice. 

However, the think tank also found some serious misunderstandings about how mortgages work. 

The ESRI and the Competition and Consumer Protection Commission brought together a sample of 110 people with mortgages and gave them a series of questions.  

They were asked to evaluate mortgage switching offers. They were then stopped halfway through and asked to read the advice on mortgages posted on the CCPC website.  

The experiment found that before reading the advice, some had opted for cashback offers in preference to offers with lower Annual Percentage Rates or APR’s. 

This would have meant higher repayments over time. 

Reading the advice, however, did make some choose the cheaper option of a lower APR. 

The exercise also found that only a third knew that switching mortgages involves paying for a solicitor, while only a quarter knew about the need to pay for a property valuation. 

Three quarters also misunderstood what an interest only mortgage was and one in ten misunderstood their debt liability were they to fall into arrears. 

“There are large gains to be had for many families by switching mortgages, so it is encouraging to see that reading official advice improves consumers’ decision-making and their confidence,”  Dr Shane Timmons, of the ESRI’s Behavioural Research Unit said. 

“Cashback can be useful, but in our experiment consumers placed too much weight on it until they read the advice. Generally, most people are better off securing long-term savings from a lower APR,” he added.

Fergal O’Leary, a member of the Competition and Consumer Protection Commission, said that for most consumers, taking out a mortgage is the largest financial commitment they will make. 

“It is crucial therefore that they fully understand the terms and conditions as well as the full long-term cost of the mortgage they choose,” he said. 

Mr O’Leary said the CCPC commissioned the research to better understand how consumers make decisions in the context of the different special offers and rates available in the mortgage market.

He said the research clearly shows that it is worthwhile to take some time to review the independent information, including the mortgage comparison tool, at ccpc.ie. 

“This is the case for first time buyers but equally so for many consumers who could save on their mortgage by switching. Taking a few minutes to check ccpc.ie can help consumers cut through the advertising material and allow them to get the best deal for their needs,” he added.

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Proposed laws aim to create new online safety regulator

Internet and social media services could in future be blocked for not complying with online safety rules, if draft new legislation published by the Government today comes into force.

Under the proposed new laws, internet companies will be legally obliged to comply with new online safety codes.

If the legislation is passed by the Oireachtas, an office of an Online Safety Commissioner, who will have responsibility for regulating content posted on internet and social media platforms such as YouTube, Facebook and Twitter, will also be set up to police the area.

The new regulator will have the power to issue compliance and warning notices, as well as impose sanctions on a service from non-compliance.

These sanctions will include as yet unspecified financial penalties, compelling the services to take certain actions and blocking an offending online service.

The plans do not, however, go as far as proposals in the UK to hold senior management at such firms personally responsible for their company’s compliance with online safety rules.

The measures are published in the general scheme of the Online Safety and Media Regulation Bill and its publication marks the first step in the legislative process.

“This new law is the start of a new era of accountability,” said Minister for Communications, Richard Bruton.

“It sets out a clear expectation for online services.”

“They will have to comply with binding online safety codes made by an Online Safety Commissioner, who will have significant powers to sanction companies for non-compliance.”

Last May the Government announced plans for new laws to regulate the online safety space, amid growing concern that users, particularly children, were not being adequately protected from harmful content by internet companies practicing self-regulation.

Under the proposed new rules published today, the Broadcasting Authority of Ireland will be replaced by a new Media Commission that will regulate the entire audiovisual sector.

The commission will appoint a new Online Safety Commissioner (OSC) to regulate web and social media content.

They will designate which online services will be covered by the new laws and then set out binding safety codes with which those services must comply.

The kind of services which could be designated may include social media, public boards and forums, online gaming, eCommerce, private communications, private online storage, online search engines and internet service providers.

Harmful online content that will be covered by the codes will include cyber-bullying as well as material promoting eating disorders, self-harm and suicide.

The codes will also seek to ensure that online platforms have effective complaints procedures through which people can seek to have material taken offline.

Product placement, advertising and sponsorship online will also have to uphold minimum standards and not be harmful under the codes.

The commissioner will also have the power to request information from such services  about how they are complying with the codes, and audit complaints procedures.

The regulator will also be able to appoint authorised officers to assess compliance and carry out audits.

“Super complaints” by NGOs and other nominated bodies, focusing on systemic issues, will also be investigated by the commissioner.

If the draft rules, as envisaged, are passed into law, the OSC will have powers to issue compliance and warning notices to the service providers, which can include ordering the removal of content.

If these notices are not properly complied with, the commissioner will be able to issue and publish warning notices.

Non-compliance with such a notification could lead to sanctions, including financial penalties, compelling online services to take certain actions and blocking services completely.

The upper amount of the financial penalties available to the commission will be decided in the coming months.

However, in order to impose any of the sanctions, the OSC will first have to receive court approval.

The new rules will not apply to online services that are not based in the state, making it near impossible for the OSC to enforce compliance in cases where such services are being supplied from outside the jurisdiction.

But the Media Commission will be able enter into voluntary arrangements with such providers that will set out the extent to which they agree to comply with safety codes.

The work of the OSC will be funded by a levy on the regulated services.

The draft laws envisage that the regulator will not be there to replace but to complement the roles of existing regulators such as the Data Protection Commision, the Electoral Commission and Gambling Regulator, as well as An Garda Síochána in the case of criminal activity.

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Numbers signing on Live Register fall again in December – CSO

The number of people signing on the Live Register is at the lowest level since January 2008, new figures from the Central Statistics Office show. 

The CSO said the Live Register total recorded a monthly decrease of 1,100 in December, which brought the seasonally adjusted total to 185,300. 

In unadjusted terms, a total of 181,996 people were signing on the Live Register last month, down 8.9% on the same time the previous year.

Earlier this week, the CSO said the unemployment rate for December was unchanged at 4.8% – the lowest level in almost 13 years. The jobless figure has been steady at 4.8% for three months in a row.

Today’s CSO figures show that the number of men signing on decreased by 8.5% to 102,878 in the year to December 2019, while the number of women fell by 9.3% to 79,118.

Meanwhile, the percentage of people aged under 25 on the Live Register stood at 10.1% in December, up from 10% in December 2018 and down from 10.4% in December 2017. 

The Live Register is not designed to measure unemployment as it includes part-time workers – those who work up to three days a week – as well as seasonal and casual workers entitled to Jobseeker’s Benefit (JB) or Jobseeker’s Allowance (JA).

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NTMA to hold one bond auction in Q1 after early syndicated sale

The National Treasury Management Agency said it will hold one bond auction in the first quarter of the year on March 12.

The NTMA covered around a third of its funding target for 2020 with a syndicated sale yesterday.

It kicked off its funding drive by raising €4 billion via a new 15-year bond sale after being swamped with bids for its debut issue for the second successive year. 

The debt agency plans to raise between €10-14 billion this year. 

The NTMA also plans to hold two Treasury Bill auctions in the first three months of the year – on February 20 and March 19.

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Numbers signing on Live Register fall again in December – CSO

The number of people signing on the Live Register is at the lowest level since January 2008, new figures from the Central Statistics Office show. 

The CSO said the Live Register total recorded a monthly decrease of 1,100 in December, which brought the seasonally adjusted total to 185,300. 

In unadjusted terms, a total of 181,996 people were signing on the Live Register last month, down 8.9% on the same time the previous year.

Earlier this week, the CSO said the unemployment rate for December was unchanged at 4.8% – the lowest level in almost 13 years. The jobless figure has been steady at 4.8% for three months in a row.

Today’s CSO figures show that the number of men signing on decreased by 8.5% to 102,878 in the year to December 2019, while the number of women fell by 9.3% to 79,118.

Meanwhile, the percentage of people aged under 25 on the Live Register stood at 10.1% in December, up from 10% in December 2018 and down from 10.4% in December 2017. 

The Live Register is not designed to measure unemployment as it includes part-time workers – those who work up to three days a week – as well as seasonal and casual workers entitled to Jobseeker’s Benefit (JB) or Jobseeker’s Allowance (JA).

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Businesses warned to deal with cashflow implications of Brexit

Businesses are being advised to put a number of preparatory steps in place to deal with the financial and cashflow implications of Brexit.

Britain is scheduled to leave the EU at the end of this month when an eleven month transition period begins.

The Banking and Payments Federation has produced a useful checklist of essential items for businesses preparing for Brexit.

The Federation says there is evidence of significant gaps in preparedness that need to be closed.

“85% of businesses say they could be impacted but are not as prepared as they could be,” Marian McCarville, Head of Funding and Resolution with the BPFI said.

“Half of SMEs say they will be impacted by the need for customs declarations, but only 10% have taken action. 14% of SMEs say they could face currency issues but only 3% have put steps in place for dealing with that,” Ms McCarville said.

The Federation is encouraging businesses to talk to Revenue about getting customs declarations in place and talking to their financial provider.

“The first step, of course, is to get an EORI number from Revenue. If traders need comprehensive customs guarantees, they will have to get the bank to provide guarantees to Revenue in support of those facilities.”

The BPFI is reminding businesses that the comprehensive guarantee applies to businesses using the landbridge to get goods to the EU, as well as those trading directly with the UK.

Importing goods from the UK will attract import taxes which are payable before the release of goods having a potential knock-on impact on cashflow.

“It will result in increased costs to their business, depending on the shape of the end agreement. In terms of working capital, they need to ask themselves if they need a buffer or a standby facility to make sure they have adequate working capital,” Ms McCarville explained.

There are a number of Brexit loans schemes on offer that are backed by the state, but the take-up of these facilities has been quite slow.

The Federation is advising business to look at such schemes, but at the very least prepare some initial financial plans.

“These are easy things to address. They’re going to need guarantees regardless of the final shape of Brexit. They will need foreign exchange facilities and they may need additional working capital.

“Get those in place as quickly as possible. They don’t have to draw the facilities down, but bring them so far as to get the ball rolling and be ready to go when you need them. What they need to avoid is disruption to business,” she concluded.

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NTMA opens syndicated sale of 15-year bond

The National Treasury Management Agency has today started the syndicated sale of a new 2035 bond that a market source said could raise around €3 billion. 

The NTMA has kicked off its funding drive with a syndicated sale every year since 2013.

It could cover around a quarter of its funding needs for this year after it announced last month that it would borrow between €10-14 billion in 2020.

Davy, Deutsche Bank, JP Morgan, Morgan Stanley, NatWest Markets and Nomura were mandated as joint lead managers for the 15-year bond sale.

Fellow euro zone issuers Slovenia and Portugal have also launched or mandated banks this week to sell new government bonds.

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Unemployment rate unchanged at 4.8% in December – CSO

The unemployment rate remained unchanged at 4.8% in December to stay at the lowest level in almost 13 years, new figures from the Central Statistics Office show. 

The jobless figure has been steady at 4.8% for three months in a row.

Today’s CSO figures show that the seasonally adjusted number of people who were unemployed stood at 119,000 in December, up from 117,900 in November.  

But when compared to December 2018, there was an annual decrease of 12,900 in the seasonally adjusted number of people who were without a job.

The CSO figures also show that the seasonally adjusted jobless rate for men in December was 5.4%, up from 5.3% in November, while the unemployment rate for women was 4.2%, unchanged from November.

They also reveal that the seasonally adjusted youth unemployment rate edged up to 12.6% in December from 12.5% the previous month.

The CSO unemployment data has been subject to sharp revisions in both directions in recent quarters.

An original estimate that the rate had fallen to a low of 4.5% in June was marked sharply up following the release of more detailed data.

The jobless rate in December was down from 5.5% the same time last year as the European Union’s fastest growing economy approaches full employment, where just about everyone who wants a job has one.

Pawel Adrjan, economist at global job site Indeed, said that despite the pause in December, the Irish labour market ended the year in an extremely strong position, with no indication that the employment boom is set to slow in 2020. 

But he said that the downside risk of Brexit remains given the strength of Ireland’s trading relationships with the UK. 

Pawel Adrjan also said a key challenge in these good times of low unemployment remains finding workers for open vacancies. 

He said that analysis by Indeed and the Central Bank showed that many high-skilled roles in healthcare, finance and engineering suffer from a dearth of talent relative to high demand from employers. 

According to the economist, the silver lining for employers and recruiters is that Ireland remains attractive to foreign jobseekers. 

“The UK election could also spur further migration to Ireland from the UK, with Indeed research showing that in the immediate aftermath of the result UK jobseeker searches for new roles in Ireland rose 44%,” he added.

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Euro zone business activity close to stagnation despite services bounce – PMI

Euro zone business activity remained close to stagnation at the end of last year, a survey showed today, as an upturn in services activity only partially offset a continued decline in the bloc’s manufacturing industry. 

IHS Markit’s final euro zone composite Purchasing Managers’ Index (PMI), seen as a good indicator of economic health, nudged up to 50.9 in December from November’s 50.6. 

That beat a preliminary estimate which suggested no change from the previous month but remained close to the 50 mark separating growth from contraction. 

“Another month of subdued business activity in December rounded off the euro zone’s worst quarter since 2013.

“The PMI data suggest the euro area will struggle to have grown by more than 0.1% in the closing three months of 2019,” said Chris Williamson, chief business economist at IHS Markit.

That is worse than the 0.2% growth predicted in a December Reuters poll. 

A PMI for the bloc’s dominant services industry bounced to 52.8 from November’s 51.9, above a preliminary reading of 52.4. 

But a manufacturing PMI out last week showed factory activity contracted for an 11th month in a row in December. 

The upturn in services meant firms were at their most optimistic about the year ahead since May. A composite future output PMI jumped to 59.4 from 57.9. 

Indicating services activity may remain resilient, firms in the sector were unable to match demand last month for the first time since July. The backlogs of work index climbed to 51 from 49.7.

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