Mr. Brendan O'Connor:

Thank you. I will start at slide 7, which kicks off with exports. That is a useful place to start, given the external environment that Mr. Power has described.

If we look at the recovery in recent years, it commenced with an export-led recovery and then firms started to invest in machinery and equipment in recent years. We had positive investment growth and in the past year or two we had growth in consumption by households. In the first half of the year, when one looks at the monthly trade series in respect of goods or overall exports in the national accounts, growth has been extremely strong. We see double digit growth in goods and services in each of the first two quarters. If we look at the monthly trade data, we will see year-on-year growth relative to the same month in 2014. This growth is in double digits. Let us take the example of July, merchandised trade was 25% higher than in July 2014 and plus 22% in June. That is not just in the foreign sectors of the economy. If we look at what we might consider to be indigenous sectors, products that are exported by Irish companies, such as food and tobacco, we are seeing from the monthly trade data robust large high single digit figure growth as well in those areas.

On the services side, it is interesting that there was double digit growth in the first two quarters this year, mainly driven by ICT services. Turning to import growth, given the structure of the Irish economy we have had consumption growth in the first half of this year and last year. Let us think about the types of things that households have started to consume. We had a record number of car licences, in the order of 100,000 by August this year, which is the first time this has happened since 2008. The consumption of white goods has increased. These products are imported into the economy. We have had quite high import growth as well. In the second quarter of this year, there was an importation of a patent of intellectual property into the economy, so service imports may to some extend may have overstated the import growth.

That describes the external situation in terms of the economy. We will move to domestic demand and this is illustrated in slide 9, with the investment story. This is important and it is what the private and public sectors are doing in terms of construction. This is a complex graph, unfortunately I do not have a screen but we have the overall investment series, which is GDFCF, Gross Domestic Fixed Capital Formation. It is expressed on a quarterly basis back to the first quarter of 2014. We have four sub-components. In the past we probably thought about investment in terms of just building and construction and machines. Due to recent methodological changes by statistical agencies, we have things like intangibles showing up in investment, that is, investment in things like R&D and other types of intangible assets as well. Aircraft has also become more prominent. There was a methodological change this year. Ireland has a very large aviation leasing sector and as of the national accounts released in the summer of this year, all the purchases of aircraft by leasing companies, regardless of where those aircraft are used, are regarded as investment by Ireland. At the same time they show up as imports as well because we import aircraft. There is no impact on GDP, although in the future it will give rise to fee income by the leasing companies, which is a service export in future years.

What stands out this year is the positive growth in core medium enterprise, that is, what is happening in factories. We also had positive growth in intangibles. In the second quarter of this year a large patent was brought on shored by an Irish company. This will give rise to fee income to patent income going forward. That did not give rise to GDP in the second quarter of this year because it was imported.

Let us turn to the next slide, which deals with residential house building. We are forecasting approximately 13,000 units this year. This is a 16.5% growth in new housing. We can see how the curve has progressed. It is coming off a low base.

Slide 11 deals with commercial real estate. This data from CBRE are quite important. They are showing vacancy rates in the Dublin area for office accommodation. In the first half of this year, the vacancy rates were in the order of the mid-2000 levels. There are big demand-side pressures which we think will give rise to investment in the medium term.

Let us turn to the next slide. I have already mentioned machinery and equipment investment by the private sector. I want to be clear that foreign companies in Ireland do not have too many financing constraints. They are able to borrow on liquid capital markets internationally. This graph gives some consideration to what is happening in the SME sector - so Irish companies - and it uses some data that we collect from the RedC SME credit demand survey. There are two panels here - turnover and profitability. I will focus the committee's attention on the blue bars on each of the panels which show that an increasing number of respondents have reported higher turnover and higher profitability in the last six months. This suggests what is happening in the trading environment for SMEs.

The next chart, which is number 13, speaks to credit growth. Again, we are looking at the SME credit status from the Central Bank of Ireland's credit, money and banking statistics. Since winter 2013, we have seen a rise in new lending to the SME sector right through to the second quarter this year - it is on a continuous upward trend. That speaks to our view on what might happen in terms of investment by the private sector. That concludes investment.

Slide 14 is about the household sector. In 2014, after a number of years, the consumption by households finally turned positive, in the order of about 2%. In the first half of 2015 it was about 3.5%, which is large in relative terms compared to recent years. This is consistent with what we have seen in the retail sales data. The retail sales index has been extremely strong right throughout the year. By end of August 2015 it was up 9% year on year and that is not only driven by car sales. If one looks at core retail sales, it was up about 6%. It speaks to positive consumption growth for the year.

Slide 15 shows recent quarterly growth. It brings together what I have just been speaking about. We have seen quarterly growth in the first two quarters of this year of about 2% but that was 7.2% year on year in the first quarter and about 6.7% in the second quarter of the year. The level of GDP passed its pre-crisis peak in 2014 and the level of GDP per capita passed its pre-crisis peak in the second quarter this year. That is per head of population.