Notes on the Front

So we’re out of recession. 
But, as the Minister for Finance warned, we shouldn’t start throwing our
hats in the air.  We’re still in a
domestic demand recession with investment falling.  Consumer spending increased slightly but is
still the second lowest quarterly return since the recession (the first being
in the first quarter of this year). 
Exports up but Government spending goods and services down.  Narrow definitions of recession are less and
less help in describing the situation we find ourselves.

Let’s take a step back and look at how things have been
going since the Government took office – at the beginning of the second quarter
of 2011.  Of course, one can’t expect any
Government to turn things around immediately after they enter office, but after
two years we should start some signs of something – especially since even in
the middle of 2011, we were being told by Ministers that we were back on the road
to recovery.  So where are we on that
road?

GDP is marginally below the level when the Government took
office.  Domestic demand is significantly
below – more than 5 percent.  Exports are
slightly up at 2 percent.  In terms of
the overall economy we are stuck in the same place on the road, not having moved in two years.  The short-had term is stagnation.

Looking at the components of domestic demand – which makes
up 75 percent of the economy – we find:

All components of domestic demand are below the levels which
the Government inherited when they entered office two years ago.  Consumer spending is marginally down; spending
on public services is, unsurprisingly, down further – since the Government is
in austerity mode.  But it is investment –
after a spike in early 2012 – that has been on a considerable medium-term slide, falling by over
16 percent.  This latter category is
significant since the Government claimed last year that investment was a priority;
but more importantly, because investment is the driving force behind an economy’s
productive base and future capacity to grow. 
In essence, we are robbing future income to pay for today’s failed
austerity programme.

Overall, Government Ministers consistently refer to a ‘fragile
recovery’.  In most key categories the it is hard to describe this as 'recovery', fragile or otherwise.  Hopefully, this will
turn around in the future.  But as
Minister Noonan warned – don’t throw your hats in the air.  Especially as they may well blow away.