Ireland's economic downturn turns into a deluge
Tumbling house prices, rising unemployment and inflation helping to fuel "feel-bad factor."
The Irish political capacity for denial is being sorely tested in a summer of economic discontent as what has been termed a "temporary downturn" is proving as stubborn as the incessant rain.
A recent cartoon in The Sunday Tribune newspaper depicting a woman on the beach saying "it's not rain, it's just a temporary downpour" sums up the national desire to bury its head in the sand.
Yet talk of recession is increasingly hard to avoid as unemployment hits a nine-year high, consumer confidence plunges and an exchequer shortfall of 775 million euros (1.15 billion dollars) is announced.
July figures from the state statistics authority, the Central Statistics Office (CSO), show that the unemployment rate has hit 5.9 percent, the highest since 1999. The mantra from bullish commentators so far has been that the lay-offs would be confined to the troubled construction sector.However, the CSO said a growing proportion of those who had lost their jobs were women, showing that the jobs market was suffering well beyond the male-dominated construction sector.
As house prices fell for the sixteenth month in a row, the marked slump in the building industry continued in July with the number of new homes registered falling by more than 80 per cent compared with the same month last year.
According to figures released by Homebond and Premier Guarantee, firms that register new developments, 481 homes were registered in July 2008, compared with 2,575 in July 2007.
Economy watchers in Ireland were also disheartened by July's poor consumer sentiment figures as consumer spending has been one of the driving forces behind the Irish economy.
According to figures released by the IIB bank and the Economic Social Research Institute (ESRI) think tank, consumer sentiment fell to a record low of 39.6 percent in July down from 42.2 percent in June, the lowest reading since the index began in 1996.
According to the IIB, the "feel-bad factor" and the no vote to the European Union's Lisbon Treaty in June may have fed each other.
As if there were not enough bad news, figures released last week showed that tax revenues for July had fallen short of government expectations by 776 million euros.
This combined with the collapse of the national pay talks at the beginning of August, possibly bringing an end to over two decades of national pay agreements, caused widespread alarm.
"We are now facing the most serious economic situation in two decades with the exchequer situation continuing to deteriorate, live register numbers rocketing with workers losing jobs across many sectors, inflation again touching 5 percent and -- for the first time for more than two decades -- a failure to conclude a national pay agreement," Senator Alan Kelly, Labour Party spokesman on finance said.
Others are less pessimistic, predicting that the recent fall in oil prices, the strengthening of the dollar against the euro, and a possible cut in interest rates by the European Central Bank could help the economy.
It is also hoped that a drop in the cost of living of 0.3 percent in July, bringing the annual rate of inflation down to 4.4 percent from 5 percent in June could help the pay talks.
Chief economist at the Ulster Bank Pat McArdle told Ireland's national broadcaster RTE that entertaining hopes of an early recovery was like clutching at "straws in the wind. There are a few positives, but I wouldn't and couldn't say that there are any signs of recovery yet," he said.