Last year total employment rose by 2.9pc, and is now just 1pc below the peak reached during the Celtic Tiger period. The employment component of the Purchasers Managers Index (PMI) suggest that labour market conditions should continue to tighten in 2018, which in turn should apply further upward pressure on wages, Investec said. Rising employment and wage growth, allied to muted overall inflationary pressures, should deliver another good year for the retail sector in Ireland, the report predicts.
However the specialist bank warned that headline retail sales are still being dampened by sterling pressure on the motor trade, with new car sales down almost 3pc year-on-year to-date this year. The PMIs also point to a sharp rate of expansion in the economy, just not quite at the same “blistering” pace seen at the end of 2017, Investec said in its ‘Irish Economy Monitor’ for the first quarter of 2018.
The specialist bank warned that the most pressing issue in the country remains a chronic lack of housing. Official housing completions were 19,271 units in 2017, up 29pc year-on-year, but this is still well adrift of even the low end of the range of estimates for new household formation in Ireland (30,000-50,000 per year), according to Investec. “We have nudged up our completions forecasts for 2018 to 21,500 from 21,000 and for 2019, to 24,000 from 23,000, but the key message remains that it will be a number of years before output can meet the flow of new demand,” Philip O’Sullivan, economist with Investec, said. “To this end, we continue to foresee strong house price growth.” Mr O’Sullivan added that the narrative is similar for the rental market, although rent caps in key urban centres will see a slower rise in rents. The rising demand for houses has led to rising prices and Investec continues to see house prices rising by a further 8pc in 2018.
In terms of potential risks to the economy, those cited were mainly external, such as Brexit, US policy changes, and the potential fallout from monetary policy normalisation moves, including rate changes from the Bank of England and Federal Reserve.