Written answers

Tuesday, 17 January 2017

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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245. To ask the Minister for Finance the extent to which he remains satisfied that all the economic indicators remain constant; and if he will make a statement on the matter. [41556/16]

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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343. To ask the Minister for Finance the extent to which he remains satisfied that all economic indicators remain stable and consistent with requirements for the future notwithstanding any changes in the international political situation; and if he will make a statement on the matter. [1965/17]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 245 and 343 together.

Notwithstanding the significant political developments in the past few months, recent economic indicators have generally been positive, indicating that the recovery is continuing in a sustainable manner.  

GDP grew by 6.9 per cent in the third quarter of this year on an annual basis. This follows annual growth of 3.1 per cent in the second quarter.

While the strong growth in the third quarter was driven by net exports, overall the recovery is now being increasingly driven by domestic demand with strong contributions from both consumption and investment spending. Indeed, personal consumption is up 3.2 per cent in the first three quarters of this year on an annual basis.

The economic recovery is most clearly evident in the labour market. Employment grew by 2.9 per cent (+57,500) over the year to Q3 2016, the sixteenth successive quarter of employment growth. The increase in employment remains broad based with gains recorded in 12 of the 14 sectors reported by the CSO.

Recent data published indicate that:

- The volume of retail sales increased by 4.3 per cent year-on-year in November 2016. Core sales (excluding motor trades) were up by 4.9 per cent over the same period.

- New cars licensed for the first time were up 17.8 per cent in 2016 compared to 2015.

- Expansion in the construction sector continued in November with the Purchasing Managers' Index for the sector recording its thirty-ninth successive month of expansion.

- The Consumer Sentiment Index was 96.2 in December, well above its long run average.

- The seasonally-adjusted monthly unemployment rate for December was 7.2 per cent, down from 8.9 per cent in December 2015.  As a result, the unemployment rate has fallen by more than half since its peak of over 15 per cent in early-2012.

However, there are several sources of uncertainty at present including the UK's decision to exit the EU. The sharp depreciation of sterling is the most significant short-term impact arising from Brexit. While the euro-sterling exchange rate has moderated from the post referendum peak of €1 = £0.90, it remains particularly volatile increasing to almost €1 = £0.87 in recent trading, representing a 13 per cent appreciation since the UK vote. This poses significant challenges, particularly for parts of the exporting sector and areas sensitive to cross-border trade.

In addition, there is uncertainty surrounding the change in administration in Washington, including the extent to which US economic policy will shift towards protectionism.

These sources of uncertainty highlight the importance of prudent management of the public finances and of competitiveness-oriented policies that would help the Irish economy to weather any global economic downturn that may emerge.

In summary, I am satisfied that the economic indicators remain stable although the full impact of Brexit is yet to be seen. I am also conscious that the level of uncertainty regarding international developments is very high. In this regard, it is critical that appropriate polices are implemented in Ireland and that is what the Government is doing and will continue to do.

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