Showing posts with label Irish construction industry. Show all posts
Showing posts with label Irish construction industry. Show all posts

Tuesday, February 18, 2020

18/2/20: Irish Statistics: Fake News and Housing Markets


My latest column for The Currency covers the less-public stats behind the Irish housing markets: https://www.thecurrency.news/articles/9754/fake-news-you-cant-fool-all-of-the-people-all-of-the-time-on-property-statistics.

Key takeaways:
"Irish voters cast a protest vote against the parties that led the government over the last eight years – a vote that just might be divorced from ideological preferences for overarching policy philosophy."

"The drivers of this protest vote have been predominantly based on voters’ understanding of the socio-economic reality that is totally at odds with the official statistics. In a way, Irish voters have chosen not to trust the so-called fake data coming out of the mainstream, pro-government analysis and media. The fact that this has happened during the time when the Irish economy is commonly presented as being in rude health, with low unemployment, rapid headline growth figures and healthy demographics is not the bug, but a central feature of Ireland’s political system."

Stay tuned for subsequent analysis of other economic statistics for Ireland in the next article.

Tuesday, July 15, 2014

15/7/2014: Construction Sector PMI: Q2 2014


June PMI for Construction industry were out this week. Good discussion of some monthly data on this topic here.

Here are quarterly averages through Q2 2014:

  • Total Activity index is up 3.6 points to 61.2 in Q2 2014 compared to Q1 2014. The index is up significantly - by +18.8 points - on Q2 2013.
  • On average we have fourth consecutive quarter of growth in the sector activity and in three of these quarters, the index was statistically significantly above 50.0 expansion mark.
  • Based on these figures we are in a confirmed recovery in the sector and in Q2 2014 this accelerated substantially. Which is good news.
  • Housing Activity sub-index rose to 61.9 - marking rapid growth - and is now up 2.8 points on Q1 2014 and 17.1 points on Q2 2014. Again, we are into fourth consecutive quarter of above 50 readings and, as above, this is the third consecutive quarter of statistically significant readings above 50.0.
  • Commercial Activity sub-index rose to 61.5, up 2.8 points on Q1 2014 and 20 points on Q2 2013. Same dynamics over the last four quarters as in the case of the Total Activity index and Housing Activity sub-index.
  • Civil Engineering index is a drag on overall growth picture, averaging 44.9 over the Q2 2014, up 4.2 points on Q1 2014 and up 12.1 points on Q2 2013, but still below the 50.0 line. This is expected, as the Government continues to destroy public investment at an alarming rate.
Chart to illustrate:


Thursday, April 24, 2014

24/4/2014: Where's that Fabled Property Boom in Ireland?..


Throughout 2013 and indeed starting from as far back as mid-2011, there has been a never-ending stream of 'good news' stories from the property markets. Many are real. Many are unverifiable. Some a complete nonsense.

Here is one forward-looking indicator for the health of the property market: planning permissions granted. And courtesy of CSO we can now update Q4 2013 data and thus compute full year 2013 results.

Here they are:

  1. Planning permissions granted for All Types of Construction fell 3.5% y/y in 2013 to an absolute historical minimum of 13,901 (data from 1992). Between 2011 and 2013 total number of planning permissions is down 13.1%. Compared to peak, these are now down 77.7%. There is no turnaround in sight judging by these numbers. In fact, 2013 was 6th consecutive year of y/y declines.
  2. Planning permissions granted for dwelling fell even more steeply: down 9% y/y in 2013 and down 23.6% since 2011. These too are now at historical low and in decline for seven years in a row. There is no turnaround here either.
  3. Other new construction (ex-dwellings) planning permissions posted a rise of 0.7% y/y in 2013 and are up 14.9% on 2011 levels. However, at 3,431 total, these are 4th lowest in history and below the levels recorded in any year between 1992 and 2009. Relative to peak these are down 82%, so steep increase since 2011 was (a) exhausted in 2013 (given weak 0.7% rise) and (b) appears to be based on sheer magnitude of the permissions collapse at the height of the crisis. Still, we might call this some evidence of something that might signal a turnaround.
  4. Planning permissions granted for extensions fell 3.6% y/y in 2013 and are down 12% on 2011 levels. These series hit absolute historical low in 2013 and mark 6 consecutive years of declines. 
  5. Planning permissions granted for alteration, conversion and renovation purposes rose 0.8% y/y in 2013, with series down 6.6% on 2011 levels. 2013 was the second lowest year on record. Again, this evidence is not consistent with a turnaround.
Two charts to illustrate:


In terms of floor area approved:
  1. 2013 saw increases of 4.4% y/y for all types of planning permissions granted. However, the increase was from the levels that were so low that even with 4.4% rise in 2013, 2013 levels are still 21.6% below those in 2011. 
  2. 2013 was the second lowest year on record for planning permissions (by floor area) granted for All Types of Properties, for dwellings, for other properties ex-dwellings.
  3. 2013 was the worst year on record for planning permissions granted on the basis of floor area for extensions.

Key takeaway: Planning permissions granted data shows no signs of a turnaround in building & construction sector in Ireland in 2013 and no signal of such turnaround in early 2014 either.

Thursday, March 13, 2014

13/3/2014: Building & Construction: Weak Growth on Trend in Q4 2013


Yesterday, CSO published data on production volumes and values in Irish Building and Construction Industry covering the period through Q4 2013. Here are the details:

All Building & Construction:

  • Value of production in All Building & Construction in Ireland rose 11.77% y/y following a 20.67% rise in Q3 2013. This marks 5th consecutive quarter of increases in Value.
  • Value of production in All Building & Construction is now up 39.79% on Q2 2011, but is still down 71.74% on pre-crisis peak. It is 47.2% above the crisis period low.
  • Value index is now back at the levels last seen in Q4 2009-Q1 2010, but still significantly lower than in any quarter between Q1 2000 and Q4 2009
  • Volume of production in All Building & Construction in Ireland rose 10.97% y/y in Q4 2013 having posted a 20.0% rise in Q3 2013. This marks 5th consecutive quarter of no decreases in Volume, and a third consecutive quarter of increases.
  • Volume of production in All Building & Construction is now up 36.68% on Q2 2011, but is still down 72.9% on pre-crisis peak. It is 45.1% above the crisis period low.
  • Volume index is now back at the levels last seen in Q4 2009-Q2 2010, but still significantly lower than in any quarter between Q1 2000 and Q4 2009.


The trend up in the overall activity shown above is decomposed as follows for value and volume:

Key drivers for Value Index:
  • Building ex-Civil Engineering activity rose in Value by 28.4% in Q4 2013 compared to Q4 2012, accelerating previous increases and posting the third consecutive quarter of positive growth. Nonetheless, increases are taking place from very low levels, with index still down 78.26% on peak.
  • Residential building value activity posted a rise of 15.04% in Q4 2013 on Q4 2012, which is an increase on 8.8% rise posted in Q3 2013. Residential construction remains a major laggard, however. The index is up on 27.7% on its crisis period lows and is still down 91.5% on pre-crisis peak. Value in the sector is at around Q1 2011.
  • Non-residential building rose 36.27% in value between Q4 2012 and Q4 2013 and the index is now 75.9% above its crisis period low. Compared to pre-crisis peak, the index is down 'only' 29%. Non-residential building is a major driver of the upward dynamics in the overall Value index.
  • Civil engineering continued to shrink, with Value of activity in this sub-sector down 11% y/y in Q4 2013 and index down 35.8% on peak. However, previous gains in the index meant that Q4 2013 reading was 81.5% above crisis-period lows.


Key drivers for Volume Index:

  • Building ex-Civil Engineering activity rose in volume by 27.5% in Q4 2013 compared to Q4 2012. Nonetheless, increases are taking place from very low levels, with index still down 79.1% on peak.
  • Residential building value activity posted a rise of 14.1% in Q4 2013 on Q4 2012 and the index remains a major laggard: up only 25.8% on its crisis period lows and is still down 91.8% on pre-crisis peak.
  • Non-residential building volume rose 35.4% between Q4 2012 and Q4 2013 and the index is now 75.2% above its crisis period low. Compared to pre-crisis peak, the index is down 'only' 30.7%. Non-residential building is a major driver of the upward dynamics in the overall volume index.
  • Civil engineering continued to shrink, with volume of activity in this sub-sector down 11.6% y/y in Q4 2013 and index down 37.2% on peak. As with value, previous gains in the index meant that Q4 2013 reading was 64.7% above crisis-period lows.
So core conclusions:
  • Increases in sector activity point to a very sluggish upward trend in Building and Construction by Value and Volume. This trend is confirmed in Q4 2013, but the sector continues to struggle to show appreciable level gains.
  • Increases in Value and Volume are driven primarily by Non-Residential construction ex-civil engineering, with Residential building lagging in terms of growth rates, but still posting some gains.
  • Civil engineering sub-sector is the weakest of all, posting y/y declines in Q4 2013.

Monday, March 10, 2014

10/3/2014: Industrial Production & Turnover: Q4 2013 & January 2014


CSO released Industrial Production & Turnover figures for January 2014 back last week, and here is an update.

Obviously, we all are familiar with the fact that Manufacturing is booming once again, thanks for PMI signals, but... table above is not exactly cheerful, is it? On an annual production volumes data, activity is down 1.4% and turnover is up only 0.2%. On 3mo basis, production volumes are up just 0.2% and turnover is down massive 5.0%. Ugly...

Let's take the following experiment. Irish industrial production data (monthly series) is pretty volatile. So instead, let's take a look at quarterly data and augment this with the latest available data for running quarter (so for Q1 2014, let's take the only data currently at hand, that covering January 2014). Furthermore, let's look at seasonally-adjusted series to strip out even more volatility. Here are some charts with quick commentary.

Traditional Sectors:


Trend down, but January 2014 is above trend.  Beyond that:

  • Current running quarter is 3.44% up on Q4 2013 and Q4 2013 was up 0.35% on Q3 2013 on volume basis. Current year on year is +6.12% on volume basis. So things might be improving.

Manufacturing:

No above luck with Manufacturing: trend down and we are below trend. Beyond that:

  • By turnover, current Q1 2014 is down 1.37% on Q4 2013 and Q4 2013 was down 3.47% on Q3 2013. Year on year, current is down 2.40%, while Q4 2013 was down 1.76% y/y.
  • By volume, current Q1 2014 is up 0.1% on Q4 2013 and Q4 2013 was down 1.68% on Q3 2013. Year on year, current is down 1.22%, while Q4 2013 was down 0.66% y/y.
Do tell me where those PMIs are now?

Worse, you can't really blame Pharma and Chemicals for this alone. Trend in this sector is down, and we are below trend, but Q1 2014 so far showing a slight uptick"



  • By turnover, current Q1 2014 is down 4.36% on Q4 2013 and Q4 2013 was down 10.19% on Q3 2013. Year on year, current is down 10.60%, while Q4 2013 was down 3.54% y/y.
  • By volume, current Q1 2014 is up 1.39% on Q4 2013 but Q4 2013 was down 5.98% on Q3 2013. Year on year, current is down 2.05%, while Q4 2013 was down 1.58% y/y.
Things are ugly in Pharma, true. But this is not the sole driver of manufacturing.

Modern Sectors aka MNCs that are, allegedly, supposed to benefit from the global upturn:


Trend down, series below trend, shrinking still:
  • By volume, current Q1 2014 is down 0.35% on Q4 2013 but Q4 2013 was down 4.78% on Q3 2013. Year on year, current is down 3.52%, while Q4 2013 was down 1.62% y/y.
Unpleasant. 

Friday, January 10, 2014

10/1/2014: Irish Industrial Production & Turnover: November 2013


Production for Manufacturing Industries for November 2013 in Ireland was up 13.0% on October 2013 and on an annual basis production increased by 15.9%. Turnover rose 1.2% in November 2013 when compared with October 2013 and an annual basis turnover increased by 0.7% when compared with November 2012.

These are big numbers. Which is good news. But they come with huge volatility in the series overall, so better comparative is on 3mo rolling basis. Here things are less pleasant:
- The seasonally adjusted volume of industrial production for Manufacturing Industries for the three months September 2013 to November 2013 was 0.1% higher than in the preceding quarter.
- Year on year All Industries production indices for 3 months period through November were still up robustly by 7.3%
- Turnover was 0.2% lower.

Per CSO: "The “Modern” Sector, comprising a number of high-technology and chemical sectors, showed a monthly increase in production for November 2013 of 13.4%. There was a monthly increase of 0.4% in the “Traditional” Sector."

Good news here is that y/y figures for production are up on a 3mo basis. Chemical and pharmaceuticals sector posted 21% rise. Basic metals a gain of 23.9%. But Food products fell 0.3% and Beverages fell 8.3%. Also, Computer, electronic, optical and electrical equipment production shrunk 16.2%.

Poor news came on q/q dynamics side. For September-November 2013, compared to 3 months period through August 2013, Capital goods production was down 3.6%, Intermediate goods production was up just 0.2%, Consumer goods production fell 1.0% with Durable Consumer Goods output down 30.4% and Non-durable Consumer Goods up 4.8%.

Full details here: http://www.cso.ie/en/media/csoie/releasespublications/documents/industry/2013/prodturn_oct2013.pdf

Summary:

Wednesday, September 25, 2013

25/9/2013: Planning Permissions, Ireland, Q2 2013 and H1 2013

Q2 data for Planning Permissions Granted in Ireland is out today and on the surface it offers some good news reading.

Per CSO: In the second quarter of 2013, planning permissions were granted for 1,926 dwelling units, compared with 1,406 units for the same period in 2012, an increase of 37.0%.

In addition:
  • Planning Permissions were granted for 1,496 houses in the Q2 2013 an increase of 28.3% y/y.
  • Planning permissions were granted for 430 apartment units, an increase of 79.2% y/y. 
  • The total number of planning permissions granted for all developments was 3,368. This compares with 3,672 in the second quarter of 2012, a decrease of 8.3% y/y. 
  • Total floor area planned was 834 thousand square metres in the second quarter of 2013. Of this, 39.9% was for new dwellings, 39.7% for other new constructions and 20.4% for extensions. The total floor area planned increased by 1.2% in comparison with the same quarter in 2012. 

Some encouraging signs up there… although if you think the crisis is over, here's a handy chart from CSO:
The above, as CSO notes, puts things into perspective: we are starting from exceptionally low levels, so even a small uptick translates into large percentage changes. Still, I am happy to spot an improvement.

Now, let's take a closer look. I am dealing from here on with permissions issued, not units covered by these permissions.

  • Total number of planning permissions was down at 3,368 in Q2 2013, a decline of 8.28% y/y. In Q1 2013 there was a decline of 2.76% y/y, so rate of decline increased from the beginning of the year.
  • Total number of planning permissions in H1 2013 stood at 6,643 - down 5.64% y/y.
  • Total number of new permissions for dwellings granted in Q2 2013 was 772, which is down 18.05% y/y, which compares to 9.93% drop recorded in Q1 2013.
  • Total number of planning permissions for dwellings in H1 2013 stood at 1,634 - down massive 13.95% y/y.
  • Total number of new permissions for other new construction (ex-dwellings) granted in Q2 2013 was 754, which is down 8.94% y/y, which compares to a rise of 12.95% recorded in Q1 2013.
  • Total number of planning permissions for other new construction (ex-dwellings) in H1 2013 stood at 1,539 - up barely noticeable 1.05% y/y. At least these series were up.
  • Total number of permissions for extensions granted in Q2 2013 was 1,489, which is down 3.87% y/y, which compares to a decline of 3.21% recorded in Q1 2013.
  • Total number of planning permissions for extensions in H1 2013 stood at 2,785 - down 3.57% y/y.
  • Total number of permissions for alterations, conversions and renovations granted in Q2 2013 was 353, which is unchanged y/y, and compares to a decline of 11.94% recorded in Q1 2013.
  • Total number of planning permissions for ACRs in H1 2013 stood at 685 - down 6.16% y/y.

So in terms of actual permissions issued: we have a bit of a soggy outcome: nothing is up, everything is down y/y… Declines have accelerated in Q2 compared to Q1 in four out of five categories; and H1 figures are very poor for all, but one category. In terms of units approved: we have a decent uptick. I would suggest we use caution and see if the activity picks up from here on.

Three charts to illustrate:



Wednesday, September 18, 2013

18/9/2013: Building & Construction Sector: Some Cautiously Positive Signs in Q2 2013

CSO released today Q2 data for production indices in Building & Construction. Here are some headline numbers:

Value of Production Indices:

  • All building & construction production rose 4.23% q/q and is up 11.98% y/y. The Index is up 7.11% on Q2 2011, but is still down 76.64% on peak. Note: Q2 2012 was the absolute low. The index is now on the rise since Q3 2012 so we have nine months of increases. The rate of increase is significant, but the rise is from a very low level of activity to start with.
  • Building ex civil engineering is up 8.2% q/q and 11.24% y/y. The series are down 3.88% on Q2 2011 and down 82.54% on peak. Note: Q2 2012 was the absolute low. The index is now on the rise only since Q1 2013 so we have to be cautious with interpreting any increases to-date.
  • Residential building activity rose 2.25% q/q and is up 8.33% y/y. The activity level is now exactly at the level it last recorded in Q1 2012. The index is still down 92.0% on peak and is now up 8.3% on absolute low. This marks the second consecutive quarter of increases, which suggests that we are getting closer to calling a turnaround. The index is still down 10.78% on Q2 2011.
  • Non-residential building activity is up 10.95% q/q and 13.22% y/y, but only 0.16% on Q2 2011. Relative to peak, activity is down 50.77%, but it is up 13.22% on absolute low. The series are volatile and we have only one quarter of increase consecutively, which means we should read this change with caution.
  • Civil engineering activity is slightly down -0.13% q/q, but still up 12.59% y/y. Activity is now 31.79% ahead of Q2 2011 and the series are down 44.63% on peak and up 59.23% on absolute low. Timing of these series changes is more consistent with public spending and thus quarterly changes are not exactly very useful. 

Volume of Production Indices:

  • All building & construction production rose 1.7% q/q and is up 11.16% y/y. The Index is up 4.37% on Q2 2011, but is still down 77.17% on peak. The index is now on the rise since Q3 2012 or nine months of consecutive increases. This suggests that price effects had a positive boost to value numbers shown above, but overall trend up is sustained on both volume and value sides.
  • Building ex civil engineering is up 8.0% q/q and 10.76% y/y. The series are down 5.91% on Q2 2011 and down 83.54% on peak. The index is for just one quarter, so the same caution expressed about the value index applies to volume.
  • Residential building activity rose 1.25% q/q and is up 8.0% y/y. The index is still down 92.2% on peak and is now up 10.96% on absolute low. This marks the second consecutive quarter of increases.
  • Non-residential building activity is consistent with the value index performance, same as for civil engineering activity is slightly down -0.13% q/q, but still up 12.59% y/y. Activity is now 31.79% ahead of Q2 2011.
Overall: some positive news on total index and very cautiously positive news on ex-civil engineering data. Residential activity showing positive upside, but non-residential series are still bouncing along the bottom. Non-residential activity is showing some cautiously positive developments.

Charts to illustrate:



Monday, September 2, 2013

2/9/2013: Sunday Times August 25: Construction Sector Revival?

This is an unedited version of my Sunday Times article from August 25, 2013.


Not a week goes by without a new report on the property market and construction sector digging up disparate shreds of evidence to suggest yet another turnaround in the property sector fortunes. Some of these are based on the real data, albeit often selectively interpreted; others, on desperate hodgepodge of hearsay and industry anecdotes.

Spin and marketing talk aside, the data itself can be highly unpredictable and hard to interpret. Between Q1 2010 and Q4 2011, Irish Construction sector Purchasing Manager Indices (PMIs) published by Markit and the Ulster Bank were signalling what looked like a stabilisation. CSO’s building and construction sector activity index also posted a quarter-on-quarter rise in Q3 2011. The sector promptly reverted into the red from there.

Faced with past false starts in the data and promotional advertorials in the media, we may be tempted to write off the building and construction sector altogether. This would be a mistake for at least three reasons.

Firstly, traditionally, the building and construction sector acts as one of the leading indicators of real, sustained economic recovery. In particular, in normal recessions, the recovery is led by the early return of firms to capital investment, including in buildings and structures, usually closely followed by an increase in residential investment by the households. Both the US and the UK are showing this pattern over the last two years. While Ireland's recession is driven by deeply structural factors, one can expect any sustained growth momentum to occur only on foot of renewed domestic investment.

Secondly, based on real factor costs calculations, Irish building and construction sector contributes directly 1.6 percent of Irish GDP today. This is a significant contribution, although it is just a half of the average contribution recorded over Q1 1997 - Q1 2013 period. Furthermore, building and construction contribution to GDP rose by 7.3 percent in Q1 2013, while the overall GDP at factor costs declined 1.3 percent. Bringing Ireland's building industry to the long-term sustainable levels in volume and value implies increasing its direct contribution to the GDP by over EUR1.5 billion on current levels to EUR3.8-3.9 billion.  Reaching this level of activity will put Irish building and construction sector output ahead of that by the agriculture, forestry and fishing.

Thirdly, some of the recent data on building and construction sector does warrant extremely cautious optimism.

Let's take a look at the main sources of information on the state of our construction industry. These include, CSO's quarterly reports on volume and value of output in the building and construction sector, as well as more forward-looking planning permissions through Q1 2013. We also have more current Purchasing Managers Indices (PMI) covering data through July 2013. Monthly CSO data on property markets indicates, albeit imperfectly, the trends in the demand for residential investment. Last, but not least, we have international forecasts and data from the Eurostat, ECB and Euroconstruct.

On the surface, the data concerning the building and construction output points to some improvements in the sector activity and dynamics. Per CSO, year-on-year, the volume of output in building and construction increased by 10.7 percent in Q1 2013.  There was an increase of 9.5 percent in the value of production in the same period. The annual rise in the volume of output reflects year-on-year increases of 26.8 percent and 2.4 percent respectively in civil engineering and non-residential building work. Alas, output in residential building decreased by 2.5 percent. Not exactly the growth breakdown one would expect from a building investment recovery.

The above weak positives, however, are further undermined by the fact that the levels of activity in the sector remain extremely low by historical and international comparatives.

Building activity in residential construction sub-sector back in Q1 2006 stood at 107.9 as measured by value index. In Q1 2013 the same stood at 7.8. The latter number represents an increase of just 0.5 points above the all-time low. Non-residential building sub-sector posted shallower peak-to-trough declines, although these still are well in excess of anything seen in normal recessions and in other euro area countries. Despite the shallower contraction, the non-residential construction also showed poor pick-up dynamics: the sub-sector output is now up just 2.6 points relative to the absolute low in Q2 2012.

Truth is, most of the recent gains in CSO’s building and construction indices to-date have been driven not by the organic private sector investment, but by civil engineering activities. Forth quarter running, this trend suggests that although, the construction sector might have stabilised, this stabilisation appears to be driven simply by the unprecedented fall in sector activity to-date, rather than by any sizeable pick up in demand for traditional building and construction investment.

The rosy projections from Euroconstruct, envisioning Irish construction sector expanding some 16% out through 2015 is case in point. As robust as this forecast growth number might appear, if it were to materialise, Irish construction sector will only return to 2011 levels of activity by the end of 2015.

Instead of a U-shaped recovery, we are currently witnessing a continued L-shaped disaster.

More forward-looking indicators, such as the construction sector PMIs strangely contradict the data on the actual sector activity reported both by the CSO and by the Eurostat. Since around mid-2009, civil engineering PMI persistently signaled sharper contraction than overall construction sector PMI and its housing and commercial sub-sectors. More ominously, PMIs across all sub-sectors of construction industry remain in a contractionary territory every month from January 2012 through July this year. One exception is a weak expansion signaled by the housing sub-index in July this year. No matter how one spins the PMI data, however, the indicator continues to show the sector shrinking, not expanding across all quarters since the onset of the crisis, including Q1 and Q2 2013.

This points to the deeper, structural problems in the sector.

Demand for new construction remains exceptionally low, outside the small sub-pockets of activity, such as premium segment of Dublin City apartments and houses, and the highly tailored top quality office space suitable for the booming services-exporting MNCs. The former trend is clearly evident in this week's residential property prices figures published by the CSO. It is further confirmed by the data showing continued weakness in demand for residential properties based on the volume of transactions in the markets. The latter is evident in industry reports and in aggregate shift in exports growth away from manufacturing and professional services toward ICT services.

All-in, investment in buildings and construction remains effectively nil across the economy and without a significant pick up in this investment, the sector performance is going to be highly volatile and concentrated in specialist areas, such as agricultural facilities and wind farms, to be accurately reflected in the high-level data.

This month, ECB Monthly confirmed that the malaise affecting the building trade in Ireland is similar in drivers to the demand-induced recession in the euro area. The ECB linked construction industry slump in Europe to weak macroeconomic conditions, debt-stricken households and dysfunctional banking system. All factors present in the euro area case for the building sector continued decline are also at play in Ireland.

Which brings us to the last piece of evidence necessary to complete the puzzle: the planning permissions. CSO data showed that the number of planning permissions for houses actually fell 9.3 percent year-on-year, reaching the second lowest level in history of the data series. Number of permissions for apartments also fell, by 18.4 percent on Q1 2012. More ominously, aggregate activity in the construction sector, as measured by the new permissions granted, shrunk across the board and hit an absolute lowest point for any quarter since Q1 1975.

In summary, there is little evidence to-date of a sustainable and robust uptick in Irish construction sector activity, while there is plenty of evidence that the sector output is close to stabilising at the extremely low levels. After six and a half years of ongoing declines, we now have a construction industry showing ‘bouncing at the bottom’ pattern of output. Alongside the rest of the economy, Irish building firms are desperately searching some catalyst for the restart of the investment cycle.

This realisation, coupled with the recognition of the overall importance of the sector to the Irish economy in the long run and as a potential driver for the recovery should lead to a significant re-think in the policy stance toward the sector.

Targeted tax incentives for construction sector have not worked and will not work in the current environment of subdued demand. Instead, we need to push for a more aggressive deleveraging of the households and development-related property sector firms. The former means re-thinking our approach to mortgages arrears to include mandatory and enforceable restructuring and rebalancing of the household debt to deliver sustainable and quick resolution of the debt crisis. The latter implies a re-drawing of the property tax to cover land holdings.

While we might like to stimulate the demand side of the investment equation in building and construction sector, such stimulus is simply not on the cards for the Exchequer struggling with excessive fiscal deficits and debt and for the economy suffering from severe private sector debt overhang. Focusing on dealing with the household debt problems, and holding the course on fiscal targets while trying to avoid tax increases and capital spending cuts is all we’ve got as the potential tools for spurring some recovery in the construction sector.





BOX-OUT:

This week, the IMF published a research paper co-authored by the fund own researchers with participation from the University of Geneva that looked at multi-annual fiscal consolidations planned across the 17 OECD economies in the period between 1980 through 2011, including those covering the current crisis period. The researchers asked a simple, but highly contentious question: are sovereign debt markets pressures responsible for forcing the governments into adopting austerity programmes.

The study has found the only in a third of all cases of past and current austerity programmes, the plans for fiscal consolidations were driven by market pressure. In the nutshell, markets are important, but by far not the main sources of pressure on the highly indebted and/or deficit-stricken governments. The authors further found that markets exerted pressure on the governments in the cases where fiscal and macroeconomic fundamentals have deteriorated more severely than in an average crisis. In other words, the markets are not the culprits behind the severe austerity, but rather a reflection of the underlying crises present in the first place.  Per authors: “If history is a guide, the absence of market pressure will not inhibit fiscal consolidation in advanced economies with currently weak fundamentals, such as high debt ratios, adverse debt dynamics or below trend growth.”

The researchers also concluded that the current crisis is different from the previous ones, primarily because the current crisis involves “…increased policy uncertainty, monetary union in the euro area, and unprecedented monetary accommodation.”

So the fabled ‘bad wolves’ of the bond vigilantes so frequently evoked by the austerity-planning Governments in the popular media and on election trails are nothing more than the ordinary messengers conveying the reality of fiscal and monetary mismanagement.

Tuesday, June 25, 2013

25/6/2013: Planning Permissions in Ireland: Q1 2013

The latest data on Planning Permissions was released by the CSO under a rather cheerful headline: "Dwelling units approved up 24.7% in Q1 2013" which prompted me to start writing a positive note. However, having updated the database, I could not believe my eyes. Not until the third bullet point in the release do you get the sense as to what is really going on in the sector - the fact confirmed by looking at CSO data, rather than reading the CSO release which focuses the top points of analysis on positive side of select sub-components of the overall sector performance. So here are the facts, as conveyed to us by the data itself.

In Q1 2013, total number of planning permissions granted in Ireland for all types of construction stood at 3,275, which is 1.35% down on Q4 2012. This marks de-acceleration of seasonally-driven 17.96% q/q decline recorded in Q4 2012. However, on an annual basis, allowing for some seasonality controls, overall number of planning permissions granted in Q1 2013 was down 2.76%, which contrasts against an annual increase recorded in Q4 2012 of 1.13%.

In summary, things are not going well at all. Q1 2013 marks an absolute historic low for any quarter since Q1 1975! That's right: we hit an absolute historic low in 37 years and CSO release says things are 'up' by focusing on sub-series before it reports in the text the actual aggregates.


In charts below, I marked current sub-period (since Q1 2010) low against historic low before the current crisis. Take a look.



Note: in Q1 2013,

  • Total number of planning permissions hit a historic low (as mentioned above)
  • Total number of permissions for dwellings stood at 862, the second lowest after the historic low of 832 hit in Q4 2012.
  • Total number of permissions for 'other new construction ex-dwellings' stood at 785, which is above the historic low of 636, but still marks a decline q/q.
  • Number of permissions for extensions hit a historic low.
  • Number of Alterations, conversions, renovations etc hit a historic low. 
Again, I find little to cheer in the above...

Thursday, June 13, 2013

13/6/2013: Irish Construction Sector Activity Post Some Better News: Q1 2013

Some good news for Irish construction sector (not as impressive as German stuff, but... much more welcome, given the sector dynamics so far through the crisis).

Per CSO: "The volume of output in building and construction was 4.4% higher in the first quarter of 2013 when compared with the preceding period.

  • This reflects increases of 6.8% and 1.2% respectively in residential building and non-residential building. 
  • There was a decrease of 0.7% in the volume of civil engineering.  The change in the value of production for all building and construction was +1.9%. 
  • On an annual basis, the volume of output in building and construction increased by 10.7% in the first quarter of 2013.  
  • There was an increase of 9.5% in the value of production in the same period. 
  • The annual rise in the volume of output reflects year-on-year increases of 26.8% and 2.4% respectively in civil engineering and non-residential building work. 
  • Output in residential building decreased by 2.5%"
Now, graphs and a summary table for more detailed analysis:




Thursday, April 4, 2013

4/4/2013: Irish Planning Permissions 2012 data


Per data released on March 22 by CSO, Irish Planning Permissions for Construction have continued to collapse in 2012. Full year data shows that:

  • In 2012 total number of all types of planning permissions issued in the state stood at 14,407 - an all-time record low (with records starting in 1992), down 9.91% on 2011. 2010-2011 rate of contraction was 15.11% and 2009-2010 rate of decline was 27.64%, so naturally for such steep drops in previous years, the rate of annual declines is moderating. 
  • From the pre-crisis peak, number of planning permissions is now down 76.90%
  • Planning permissions for dwellings fell to 3,643 in 2012, down 23.58%, having fallen 24.89% in 2010-2011 and 38.85% in 2009-2010. Compared to peak, the permissions are down 86.76% to a new historical low.
  • Planning permissions for other new construction rose in 2012 to 3,407 from 2,964 in 2011, a rate of increase of 14.95% y/y that follows declines of 7.52% in 2010-2011 and 29.01% in 2009-2010. Relative to peak, 2012 level of permissions for other new construction are down 82.4% against absolute minimum reached in 2011 when these were down 84.72% relative to peak.


In square footage terms, planning permissions issued
  • Fell 21.56% y/y for all types of new construction (these are now down 86.67% on peak, hitting a new historical low);
  • Fell 39.48% y/y for dwellings (these are now down 90.89% on peak, hitting a new historical low);
  • Fell 7.44% y/y for other types of new construction (these are now down 86.78% on peak, hitting new historical low);
  • Rose 0.52% for extensions (these are now down 68.87% on peak, having hit the bottom at -73.41% on the peak in 2011).

At certain point in time (soon, one assumes given the rates of decline on peak already delivered), a broom shed construction somewhere in West Meath will qualify as an uplift in the market....

Thursday, March 14, 2013

14/03/2013: Irish Construction & Building Sector Activity 2012

Latest index for Irish Building and Construction Production volumes and value is out today, confirming what I wrote about on the foot of new planning permissions data (here), namely that Construction and Building sector continued to shrink in 2012 and there is little hope beyond some public spending projects uptick for the already devastated sector.

Top headline numbers for full year 2012 (these are imputed from Q1-Q4 2012 data):

  • Value index for all production activity in Building and Construction sector declined from 25.9 in 2011 to 24.7 in 2012 (using base of 2005=100). This means all activity in value terms has hit another historical low for the series and is running at less than 1/2 of the level of activity in 2000 when the index was reading 53.5.
  • 2012 was the sixth consecutive year of declines in the sector activity by value and volume. 
  • Peak sector activity was registered in 2006 with index reading of 109.7, which implies a decline from peak through 2012 of 77.5% in value terms.
  • Value sub-index for Building excluding Civil Engineering has dropped from 20.9 to 18.2 between 2011 and 2012 (decline of 12.8% y/y) and is down 83.2% on peak attained in 2006.
  • Residential Building value sub-index is down to 8.6 in 2012 from 10.2 in 2011, marking a decline of 92% on peak (2006).
  • Non-residential building sub-index for value is down to 55.2 from 61.7 in 2011 and is 53.9% below peak levels attained in 2008.
  • Civil engineering value sub-index was up in 2012 to 66.0 from 58.6 in 2011 (+12.6% y/y) but is down 49.3% on peak attained back in 2007. 
Similar story is traceable across the volume of production indices.

Charts to illustrate (note, charts are referencing a different base - instead of 2005=100 these have been rebased to 2000=100 for more clear compounded effect illustration):




Monday, February 11, 2013

11/2/2013: Irish Industrial Production & Turnover: December 2012


Still catching up with data updates following a busy week lecturing.

Last week CSO issued data for december 2012 on Industrial Production and Turnover. Here's the detailed breakdown.

On Production volumes side:

  • Index of production in Manufacturing Sectors rose to 112.0 in December 2012 up 11% on 100.9 in November 2012. Year on year index is up 2.85% - anaemic, but at least positive. 
  • However, compared to December 2007 the index is still down although insignificantly at -1.72%. The issue here is that de facto this means that Irish Manufacturing Sectors are static over the last 5 years. 
  • 3mo average through December is down 3.77% on 3mo average through September 2012 and is 7.15% down on 3mo average through December 2011. Thus, longer term dynamics, smoothing out some of the m/m volatility are not encouraging. 
  • On shorter end of dynamics, however, things are slightly better: December reading is 112 and it is well-ahead of 6mo MA of 106.75 and 12mo MA of 108.99.
  • Index of production in All Industries also improved in December to 108.8 up 1.58% y/y and 8.47% m/m.
  • Compared to December 2007 the index is down significantly at -4.26%, which again shows that Industrial activity in Ireland has fallen relative to 5 years ago or at the very least - has not risen.
  • 3mo average through December 2012 is 3.83% behind 3mo average through September 2012 and 7.01% below 3mo average through December 2011.
  • As with manufacturing, shorter end of dynamics is more positive with December 2012 reading at 108.8 ahead of 6mo MA of 105.12 and 12mo MA of 107.19. 
  • Modern sectors activity rose strongly at 9.3% m/m to 120.6 in December 2012, although y/y rise was much weaker at 1.86%. 
  • The index is ahead of December 2007 by a marginal 1.82%.
  • 3mo average through December 2012 is 7.68% below 3mo average through September 2012 and 9.61% below 3mo average through December 2011.
  • Shorter dynamics are not too positive: the current reading of 120.6 is only marginally ahead of 119.82 6mo MA and is below 12mo MA of 124.05. 
  • All dynamics in the Modern Sectors show steep falloff in Pharma activity.
  • Lastly, Traditional Sectors activity returned to contraction in December, falling to 86.9 (-1.3% y/y and -1.25% m/m). The index is now 15.35% below where it was in December 2007. 3mo average through December 2012 is 1.73% down on previous 3mo period and is 1.37% down on same 3mo average in 2011. Worse than that, after posting a surprise uplift in November, the index is now running only slightly ahead of 6mo MA of 85.5 and 12mo MA of 85.13.
  • So on the net, good news is that outside Traditional Sectors time series in volume activity are trending up in last two-three months. Bad news is - we are still off the levels of activity consistent with 2011 and are way off from regaining any sensible growth on 2007.
Chart to illustrate:


On Turnover Indices side:
  • Manufacturing Sectors turnover fell from 101.1 in November 2012 to 97.0 in December 2012, down 3.10% m/m and down 10.76% y/y, both steep declines. Compared to the same period of 2007 the index is now down 9.5%. 3mo average through December 2012 is down 4.35% on 3mo average through September 2012 and is down 6.36% y/y.
  • This index is pretty volatile m/m but overall, 6mo MA is at 98.93 and 12mo MA at 98.33 - both ahead of December monthly reading.


New Orders sub-index for all sectors is trending flat over the recent months (as per chart above) reaching 96.9 in December 2012, down from 100.1 in November 2012, so the index is down 3.2% m/m and it is down even more significant 10.9% y/y. Compared to December 2007 the index is down 11.6%. On 3mo dynamics the index is down 5.04% period on period and 6.7% y/y.

I will blog separately on dynamics in the phrama sector next.

Wednesday, November 7, 2012

7/11/2012: A patent cliff or a temporary slide?


In the previous post, looking at the top-line figures for Industrial Production for Ireland, I have promised to look more closely at the dynamics underlying the largest singular exports (goods) driver - the Pharma sector - Basic Pharmaceutical Products and Preparations (BPP&P) sector. Here are some numbers and trends.

An excellent analysis of this is also available from Chris Van Egeraat of NUI Maynooth (link here).

Let's start from the top. Throughout, I use the current figures for September that are subject to potential future revisions.

Production volumes:

  • Index of production volume in Basic Pharmaceutical Products and Preparations sub-sector fell from 165 in August to 107 in September - a decline of 35.15% m/m and down 31.76% y/y.
  • Compared to 2010, the index is now down 29.47%, compared to the peak value for January 2010-present period the index is down 42.41%.
  • Back in September 2011, the index rose 3.36% y/y, so the swing in growth rates is extremely sizable.
  • The declines are much shallower if we look at 3mo MA readings which a more likely to be reflective of the longer trends: for the latest 3 months through September 2012, the index average is down 9.27% compared to the 3 months period through June 2012. The index is also down7.02% compared to 3 months period through September 2011 and 5.93% down on its reading for the period through September 2010. Back in 2011, 3 months average through September rose 0.57% y/y. 
Turnover:
  • Turnover index fell from 136.4 in August to 105 in September 2012 a decline of 23.02% m/m and 27.44% drop y/y.
  • Compared to September 2010, the index is now down 29.72% and compared to the all-time peak activity for January 2010-present period, the index is down 40.10%.
  • Back in September 2011 the index posted a decline of 3.15% y/y.
  • Again, looking at 3mo averages through September 2012 there was a rise in the index of 2.0% compared to 3mo average through June 2012, but a decline of 8.82% on 3mo average through September 2011. Compared to 3mo average through September 2010, current index reading 3mo average is down 11.85%. This contrasts with index 3 mo average through September 2011 declining just 0.9% y/y.
Chart:

There is clearly a steep drop off in both series. And this falloff has a significant impact on our exports and overall industrial sectors activity. 

However, the series are volatile. For example, for January 2010-present, standard deviation in the turnover index for BPP&P sector is 11.82, against standard deviation for manufacturing sector at 3.41. In terms of volume of activity, index standard deviations are 12.61 and 4.42 for BPP&P sector and manufacturing, respectively.

Nonetheless, the drops in September amounted to 4.6 STDEV in Volume and 2.66 STDEV in Value - both are sizable.

A comparable drop in Volume in November 2011 came in at:
  1. Shallower m/m change of 25%;
  2. Was on foot of historical high (August 2012 was the third highest reading in Volume terms) and
  3. Coincided with a monthly rise, not fall, in the Turnover index activity.
Thus, one has to be cautious when attributing the index moves in September 2012 to either volatility or the specific long-term trend change, such as a patent cliff (again, the note linked above from Chris Van Egeraat is spot on in this point).

However, one must be cognizant of the signifiant positive links between activity in the BPP&P sector and overall Manufacturing activity. Chart below illustrates the strength of that relationship:


One has to be also significantly concerned with the fact that we have coincident drops in Turnover and Volume, so the price effects seem to be going the same direction as the volume of activity. In general, there is virtually no meaningful relationship between sector volume and turnover. Strengthening of the link between turnover and volume can be reflective of a structural slide in the overall activity.


As usual, caution is warranted in interpreting the immediate and provisional figures. However, 'slips' like this do matter - both in terms of their immediate impact on GDP and (less so) GNP, and in the light of what we do anticipate - the reduction in overall sector activity in the near future due to patent cliff.


Tuesday, November 6, 2012

6/11/2012: Irish Industrial Production & Turnover: September 2012


There has been a massive, extremely disturbing, albeit alltogether not un-predictable fall off in manufacturing activity in Ireland over September 2012. Here's the CSO statement:

"Production for Manufacturing Industries for September 2012 was 13.9% lower than in August 2012. On an annual basis production for September 2012 decreased by 13.7% when compared with September 2011.

The seasonally adjusted volume of industrial production for Manufacturing Industries for the quarter period July 2012 to September 2012 was 4.5% lower than in the preceding quarter.

The “Modern” Sector, comprising a number of high-technology and chemical sectors, showed a monthly decrease in production for September 2012 of 22.4%. The most significant change was in Basic pharmaceutical products and preparations with a decrease of 35.2%.

There was a decrease of 1.3% in the “Traditional” Sector.

The seasonally adjusted industrial turnover index for Manufacturing Industries decreased by 5.7% in September 2012 when compared with August 2012. On an annual basis turnover decreased by 4.5% when compared with September 2011."

More on underlying dynamics:


  • Volume of Manufacturing output shrunk 13.73% y/y and 13.88% m/m. Compared to September 2007, index reading is down 13.89%. Q3 2012 reading is down 4.8% q/q and down 2.82% y/y.
  • Manufacturing activity (in volume terms) now stands at the levels last seen back in December 2009 and is down 2.6% in 2005 levels.
  • 6mo MA through September 2012 is at 110.78, virtually indistinguishable from 12mo MA of 110.98.
  • Volume index for All Industries is now at 96.8 - the level last seen between November and December 2009. The index is down 12.71% y/y and 12.64% m/m. Q3 2012 reading is down 4.52% q/q and down 3.10% y/y.
  • 6mo MA is now slightly below 12mo MA (108.75 v 109.10).
  • The index is at 3.2% below 2005 levels of activity.



  • Modern Sectors volume of activity index has fallen to 105.0 in September, down 18.03% y/y and 22.45% m/m. Activity has fallen to the lowest level since November-December 2009 and compared to September 2007 the index reading is down 8.96%. 
  • Q3 2012 index is down 5.96% q/q and down 1.60% y/y.
  • 6mo MA (127.07) is identical to 12mo MA.
  • Traditional sectors fall-off was less steep, but the index of volume of production here suffered second consecutive monthly decline. The index is down 5.01% y/y and down 1.30% m/m to reach 83.5 reading, lowest since January 2012. 
  • Traditional sectors volume of production is down 22.53% on September 2007 and down 16.5% on 2005 levels of activity.
  • Q3 2012 reading is 1.33% below Q2 reading and down 6.15% y/y.
  • 6mo MA (84.93) is below 12mo MA (85.4).


As the result of the above changes, the gap between Modern sectors activity (volume) and Traditional sectors activity has narrowed dramatically to 21.5 ppt in September against 50.8 ppt in August.



Turnover data signaled narrower reductions in activity, suggesting that some MNCs have accelerated transfer pricing in light of higher producer price inflation (as signaled by recent PMIs):

  • Manufacturing turnover activity fell to 97 in September, down 4.53% y/y and down 5.73% m/m. 
  • Compared to the same period of 2007, turnover is now down 10.08%.
  • Q3 2012 reading is up 3.70% q/q and up 0.36% y/y - once again due to improved price inflation.

New orders index reading slipped to 97 in September, down 3.96% y/y and down 6.55% m/m. Compared to same period 2007, the new orders activity is down 11.31%. Q3 2012 new orders average activity was up 3.59% q/q and up 1.44% y/y. 6mo MA, nonetheless is almost flat at 99.35 compared to 100.00 for 12mo MA.


Employment indices have slipped across a broad range of sectors in Q1 2012 - the latest for which data is reported. Modern sector employment fell to 63,500 in Q1 2012 against 67,100 in Q4 2011. Chemicals and pharma sector employment actually rose to 43,800 in Q1 2012 against 43,300 in Q4 2011, while Computers, electronic and optical products and equipment employment fell from 23,800 in Q4 2011 to 19,700 in Q1 2012. Overall industrial employment in Ireland fell from 201,200 in Q4 2011 to 192,700 in Q1 2012.

Volumes of industrial production in Basic pharmaceutical products and preparations fell 31.8% in September 2012 y/y and were down 35.2% m/m. In turnover terms, activity was down 23.1% m/m and down 27.5% y/y.

I will blog on this in more detail later tonight, so stay tuned.





Saturday, October 6, 2012

6/10/2012: Irish Industrial Production - August 2012



Per CSO:

  • Production for Manufacturing Industries for August 2012 was 0.7% lower than in July 2012. On an annual basis production for August 2012 increased by 0.2% when compared with August 2011.
  • The seasonally adjusted volume of industrial production for Manufacturing Industries for the three month period June 2012 to August 2012 was 1.8% higher than in the preceding three month period.
  • The “Modern” Sector, comprising a number of high-technology and chemical sectors, showed a monthly increase in production for August 2012 of 5.1% and there was a decrease of 0.9% in the “Traditional” Sector.
  • The seasonally adjusted industrial turnover index for Manufacturing Industries decreased by 0.1% in August 2012 when compared with July 2012. On an annual basis turnover increased by 0.2% when compared with August 2011.
Here are some more detailed stats and dynamics:




  • Volume of total Manufacturing output was down 3.43% in August compared to same month in 2007 (pre-crisis). 3mo average through August 2012 was up 1.78% on 3mo average through May 2012 and 3.75% ahead of the 3mo average through August 2011.
  • August reading for Manufacturing marks the first m/m decline since February 2012.
  • Volume of production in All Industries in August 2012 was down 4.68% on same period in 2007. 3mo average through August is 1.75% ahead of 3mo average through May and is 2.72% ahead of 3mo average through August 2011.
  • Both Manufacturing and All Industries indicate improved 3mo averages as consistent with modest improvement in output dynamics.
  • Volume of activity in Modern Sectors posted the highest reading since October 2011 and the second highest reading since the beginning of comparable series (January 2006). 3mo average through August 2012 is now 1.26% ahead of the 3mo average reading through May 2012 and is 6.59% ahead of the 3mo average through August 2011. Very strong performance in the sector.
  • In Traditional Sectors, however, volume of activity fell 14.17% y/y and is now down 20.05% on August 2007 level of activity. 3mo average through August 2012 is down 1.78% on 3mo average through May and is down 4.34% on 3mo average through August 2011.
Chart to illustrate:


  • As the result of the above trends, the gap between indices measuring the Volume of production in Modern and Traditional sectors has now widened to 51.5 - the highest reading since the all time record of 56.6 in October 2011.

It is worth noting that Traditional manufacturing sectors are usually associated with higher labour intensity than Modern sectors, implying the disconnection between improvements in overall Manufacturing index (volume) activity and the likelihood of jobs creation acceleration.

Turnover indices:

  • Manufacturing sector turnover dipped marginally in August (-0.1% m/m) but is ahead, also marginally, on the annual basis (+0.19%). The index is down 6.9% on August 2007. 3mo average through August 2012 is 5.28% ahead of the 3mo average through May 2012 and is 3.29% ahead of the 3mo average through August 2011.

Lastly, New Orders index:


  • New Orders index hit the highest reading in 2012 in August, up 3.4% y/y and 1.16% m/m, although the activity is still down 6.8% on August 2007. 3mo average through August 2012 is 5.5% ahead of 3mo average through May 2012 and 3.9% ahead of the 3mo average through August 2011.
The overall activity in the industrial production is clearly stabilizing at the recovery levels, but as noted above this is solely driven by the activity in Modern sectors.