30 Oct 2019
Irish Economy: Retail sales growth picks-up in September
September was a good month for the retail sector in Ireland in spite of the intense uncertainty that prevailed regarding Brexit.
Retail sales volumes were +4.2% y/y in September, the highest rate of growth in six months. The value of sales was a more modest +2.8% y/y indicating that consumers continue to get a good bang for their buck. Excluding the volatile motor trades industry, sales volumes were a touch higher in September at +4.7% y/y. The broad Household Equipment sector continues to be the stand-out performer with growth in sales volumes of 13.4% y/y in September and a similar annual increase in the three-month July to September period. This sector is also seemingly benefitting the most from the weaker British Pound with the greatest differential between volume growth and value growth (+6.0% y/y in September).
Overall, the retail sales data over the past couple of months has been quite good, reflecting the positive labour market dynamics more than the weaker sentiment indices.
Cairn Homes: Successful pre-planning discussions at Montrose
Cairn Homes has received approval from An Bord Pleanala, the State’s planning body, to submit its formal planning application for 611 apartments at its Montrose site in Donnybrook.
Cairn has been involved in pre-planning discussions with planners from Dublin City Council for the past nine weeks and, however it is not a formal planning decision in itself. A final decision is expected within 16 weeks once the group submits its planning application through the “fast-track” Strategic Housing Development process. Cairn bought the site from the State broadcaster RTE for €107.5m in 2017 and initially indicated that it would look to construct 500 apartments on the site.
UK election on 12 December
Last night the House of Commons voted overwhelmingly by 438 to 20 for a 12 December General Election. This was the result of the government’s ‘one line’ bill and followed its failed attempt to call an election using the Fixed-term Parliaments Act on Monday evening. This time Jeremy Corbyn and a majority of Labour MPs backed an election. As this will be an Act of Parliament, it requires consideration by the House of Lords today but it is thought that the Lords will not try to obstruct or amend the bill.
Royal Assent is then expected by Friday and Parliament will be dissolved next week. In terms of opinion polling, the Tories have gained in recent weeks and on average are leading Labour by 12-13 percent. However, the party is under pressure in London, the SE, the SW and Scotland and needs to win seats from Labour in the Midlands and the North to gain an overall majority. Note that PM Johnson restored the party whip to 10 of the 21 rebel MPs who were expelled a few weeks ago.
Sterling was little changed on the news. With the UK parliament to be dissolved on November 6th any real politically charged volatility seems unlikely but we can however now expect some sterling gyrations as the inevitable poll results begin to seep through.
FOMC 0.25% cut priced in
The US Federal Open Market Committee (FOMC) meets today for its penultimate policy setting meeting of 2019. The interest rate decision is due at 6:00pm. This will not be accompanied with a new set of economic projections nor any update to the ‘dot plot’. It will however be followed at 6:30pm with Chair Jerome Powell’s usual post-meeting press conference.
At its previous two policy meetings, the FOMC opted to cut rates by 25bps each time, taking the Federal funds target rate range down to 1.75-2.00% currently. Recent survey releases have added to concerns over a softening in economic activity, spreading beyond manufacturing. Of particular note was the September drop in the non-manufacturing ISM; this fell to its lowest level since August 2016. Importantly also, for a Fed weighing up the risks of further easing, it is likely to remain relaxed about the risk of inflation overshooting to the upside of the 2% goal. Yes, the ‘core’ CPI inflation measure stands above 2% (2.4%), but the Fed’s favoured PCE inflation metric stands below that mark on both a headline and a ‘core’ basis. It’s also worth noting that Q3 US GDP is due out later this afternoon and a softer than forecast print could sway both the decision and Mr. Powell’s rhetoric.
As it stands, we think the October decision could go either way but on balance suspect the FOMC will opt for a further 25bp cut.
EU 10.00 Consumer Confidence
US 12.15 ADP employment change
US 12.30 GDP
GE 13.00 HICP
US 18.00 FOMC announcement
US 18.30 Powell Press Conference