05 Jul 2019

Irish Banks: Mortgage approvals continue to perform in May

Irish mortgage approvals data from the BPFI show a strong pipeline of mortgage demand was approved in May (after a similarly good April followed a weak Q1).

There was a monthly outturn of €1,137m in new approvals +22.1% m/m vs April 2019 and +12.1% y/y vs May 2018, while the 12 month running total is now up to €10.55bn vs €10.42bn in April 2019 and €9.73bn in May 2018. 


The average value of approved mortgages increased +1.8% m/m to €230,722, a new high for the series since it began in 2011. Of the new approvals, 53% was for first time buyers and 13% was for switching/re-mortgaging. 


Mortgage approvals have a strong correlation with 12-month forward mortgage drawdowns, and the data suggest momentum in the sector is re-engaging after some softish data into the end of 2018 and in Q119. We still see some moderate downside risks to our current 2019 mortgage lending forecasts for the sector given signs of prices topping out in Dublin, but today's data gives us some comfort that this will not come to pass. 

Sainsbury’s - Difficult quarter negotiated without surprises

The current competitive environment in the UK supermarket sector is a challenge, as consumer uncertainty around Brexit is evident.


The quarterly IMS provided no material updates on business strategy, other than that progress was being made on the previously stated key priorities. This included reducing prices on more than 1,000 own-brand products, investing in 400 supermarkets this year and accelerating investment in technology. Management noted that 148 supermarkets now offer SmartShop self-scan facilities while 206 Argos stores offer a [email protected] service. We await a material update at the CMD on the 25th of September. 

Non-farm payrolls

US non-farm payrolls rose by just 75k in May, well down from the 224k April increase. The slower pace of job gains reflected a negative print (i.e. job losses) in the government category, a sharp slowing in service sector job additions and a slowing in construction jobs added. Manufacturing jobs gains held steadier, but they were already languishing at low levels. Our best guess is that some of this May softness reflects the volatility inherent within the establishment survey numbers, which is used for the production of the non-farm payroll estimates; we particularly expect to see some reversion in the services and government job additions. However, we also expect that some weakness will persist amidst signs of a softening in broader economic momentum at the end of Q2. Overall, our best guess is that we see a rise in the non-farm payrolls of 130k.


The headline unemployment rate remained steady at 3.6% for the second month in a row in May, at lows last seen in 1969. We expect that amidst modest changes in workforce size and with the unemployment level holding close to recent ranges, we will see the headline rate hold at 3.6% for a third consecutive month.


Today’s jobs report will be of even greater significance than normal, as a key piece of evidence the Federal Open Market Committee will be looking at before it decides whether to cut the Federal funds rate on 31 July.

German manufacturing orders

New orders in May fell back sharply by 2.2%, much worse than consensus forecasts of a 0.2% decline. With orders now 8.6% down on last year, there are few signs of any stabilisation, adding to pressure for an easing in policy by the ECB in due course. Government bond markets are already pricing in this scenario, with the 10-year German Bund yield trading at all-time lows at around minus 0.40%.

US – China

China’s Minister of Commerce spokesperson said all tariffs should be removed if the two sides are to reach a deal. Trade talks are likely to stall again should the US choose not to remove tariffs. China taking a hard line on the removal as a precondition to any trade deal could result in another stalemate and keep uncertainty entrenched.

UK – Iran

British Royal Marines seized a giant Iranian oil tanker for trying to take oil to Syria in violation of EU sanctions. The seizure of the boat is sure to heighten tensions between the two countries. This latest development comes at a time when European countries such as the UK are pushing for Iran to not walk away from its nuclear deal.


Economic Releases

13.30 US Nonfarm Payrolls

13.30 US Unemployment Rate