27 Nov 2018
CSO data show strong growth in real earnings
CSO data released yesterday show strong growth in real earnings. Seasonally adjusted average weekly earnings rose 0.7% q/q to a record €749.05 in Q3, bringing the cumulative rise since the Q311 trough to 8.8%.
Unadjusted data show annual wage growth of 3.2%, with all segments seeing growth in earnings. Some of the strongest wage inflation was, unsurprisingly, in the Construction (+5.2% y/y); Transport & Storage (+5.8% y/y); Accommodation & Food Service (+6.1% y/y); and IT (+5.3% y/y) segments. Private sector wage inflation is running at 3.6% y/y while public sector earnings were +1.9% y/y in Q318. Annual wage inflation of 3.2% in Q3 is little changed from the post-recession high of 3.4% that was recorded in the preceding quarter. Separate CSO data on industrial disputes released yesterday shown that only 1,621 days were lost in Q318, the second lowest figure in the past nine quarters. This year is on track to be the quietest in terms of industrial relations issues since the crisis years – it is very welcome to see such cohesion.
Hibernia REIT: Harcourt Street scheme green-lighted
Today’s Irish Times reports that HBRN has received planning permission from Dublin City Council for its proposed office scheme on Harcourt Street in Dublin’s CBD. The 1.9 acre site currently plays host to the Dublin Metropolitan police headquarters, which operates out of a 117k sq ft building. HBRN previously had permission to replace this with 277k sq ft of new office space, but this has now been superseded by a 315k sq ft scheme. HBRN has designed the scheme in a way that it can be either let to a single occupier (a number of large professional services firms in the neighbourhood would have a requirement for office space of that scale) or multi-tenanted. The existing lease to the OPW (the agency that manages the State’s property footprint) runs to end-2022, so it will be some years before this redevelopment goes ahead.
Theresa May encountered a significant amount of opposition in the House of Commons yesterday after she delivered a statement detailing the agreement that the UK had reached with the EU. She has subsequently come under further pressure after Conservative MP Andrew Lewer announced that he had lodged a letter of no confidence in Mrs May, the 27th Tory MP to have done so publicly. Just as it looked as though things could not get any worse, the majority of the front pages of today’s papers are emblazoned with criticism of the deal by President Donald Trump. He is quoted as having said that the deal looks “good for the EU” and as having questioned whether a UK/US trade deal would be possible. The widespread opposition to the deal demonstrates the uphill struggle that the Prime Minister faces ahead of the ‘meaningful vote’ by MPs, the date of which has now been confirmed to be the 11 December after five scheduled days of debate. In an effort to win over the public, the Prime Minister has kicked off a nationwide tour of the UK this morning with her first port of call being Powys in Wales.
Ahead of the G20 Summit at the end of this week and the meeting between President Trump and President Xi, Trump has been ratcheting up the pressure on China in a WSJ interview overnight. In the interview Trump suggested that an increase in tariffs on $200bn of Chinese imports introduced earlier this year was likely. A 10% tariff was initially introduced on those goods, but a rise up to 25% was delayed until 1 January 2019, amid some hope that the further hike might be shelved altogether. Trump also threatened to introduce tariffs on a further $267bn of Chinese imports if an agreement was not reached at the meeting with Xi this week. Trump’s comments may just be a way to put pressure on the Chinese to accept the US trade demands, but an escalation of the US-China trade dispute cannot be ruled out. The G20 meeting runs from 30 Nov – 1 Dec.
ECB speakers suggest bond buying to end in December
ECB speakers were out in force yesterday, with four ECB members including chief economist Peter Praet and President Mario Draghi speaking during the day. The overall message was clear, pointing towards an end to stimulus at the next meeting (Dec 13th), despite the recent downturn in economic data.
First to speak, Peter Praet attempted to down play the impact of the end of bond buying, stating that significant stimulus and liquidity would remain from reinvestments after new bond purchases end. He also promised that the exit would be orderly and predictable. Speaking after midday, Ewald Nowotny went further, warning of the risk of keeping rates low for an extended period, and again reiterated that the timing of the next move would be well communicated. Finally, Draghi, appearing before the European Parliament also stated that he expected asset purchases to end in December. He also acknowledged the recent downturn in data and difficult market environment, but stated that while he expected headline inflation to take a slight downturn due to the recent fall in energy prices, that it would continue to converge towards their 2% target.
Overall the ECB have managed to navigate the early stages of central bank policy normalisations reasonably well, giving markets clear warning of upcoming policy changes, and avoiding a so called “taper tantrum” which afflicted US markets when the Fed first reduced their bond buying programme. However their task is about to become more difficult in 2019, as bond buying ends and the market begins to focus on rate hikes.
19.00 US FOMC minutes