2011 Sep 13 - Jim Power - Economic Update

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2011 Sep 13 - Jim Power - Economic Update

  1. 1. ECONOMIC & FINANCIALUPDATEJim PowerSeptember 13th 2011
  2. 2. INTERNATIONAL BACKDROP Global recovery losing momentum, increasing signs of stress Developing world still growing strongly, UK & US growth downgraded, Euro Zone has serious problems Euro Zone debt crisis, oil prices, fiscal/debt concerns & withdrawal of monetary stimulus the key issues impacting on global growth Interest rates have been increased twice by ECB – no more tightening – could fall BoE & Fed to keep them on hold Inflation not an issue Lack of growth the key issue
  3. 3. 10-YEAR BOND SPREADS COUNTRY SPREAD OVER GERMANY Germany 1.91% France +75 bps Belgium +213bps Italy +331 bps Spain +309 bps Portugal +907 bps Ireland +671 bps Greece +1814 bps (1 y 97.9%)
  4. 4. THE EURO ZONE CRISIS – IS THERE A SOLUTION? Market reaction to various initiatives very confused Doubts over whether it provides enough long-term debt relief to Greece et al Reality is that debt burdens are still too high in a number of countries Watch Italian and Spanish bond yields – they are now rising again Economic growth will determine success or failure- worrying omens This story still has a long way to run – euro under serious threat Greater fiscal & political union essential – but reaching agreement impossible
  5. 5. 30 35 40 45 50 55 60 65 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 EURO ZONE PMI Sep-04 Jan-05 May-05 Sep-05Manufacturing Jan-06 May-06 Sep-06 Jan-07Services May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11
  6. 6. 30 35 40 45 50 55 60 65 Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 GERMAN PMI Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08MANUFACTURING Dec-08 Feb-09 Apr-09 Jun-09 Aug-09SERVICES Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11
  7. 7. 30 35 40 45 50 55 60 65 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 UK PMI Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05Manufacturing Jan-06 May-06 Sep-06 Jan-07Services May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11
  8. 8. 30 35 40 45 50 55 60 65 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 MANAGEMENT Jan-04 May-04 Sep-04 Jan-05Manufacturing May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 US INSTITUTE OF SUPPLY May-07Non-Manufacturing Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11
  9. 9. 100 120 140 160 20 40 60 80 0Jan-90Aug-90Mar-91Oct-91May-92Dec-92Jul-93Feb-94Sep-94Apr-95Nov-95Jun-96Jan-97Aug-97Mar-98Oct-98May-99Dec-99Jul-00Feb-01Sep-01Apr-02Nov-02Jun-03Jan-04Aug-04 US CONSUMER CONFIDENCEMar-05Oct-05May-06Dec-06Jul-07Feb-08Sep-08Apr-09Nov-09Jun-10Jan-11Aug-11
  10. 10. IRELAND-THE ECONOMIC OUTLOOK Consumer spending power & confidence will be eroded by ongoing pressure on disposable incomes – discretionary spending under particular pressure Business investment will remain weak – lack of credit Tourism stronger Agri-food sector stronger Construction will decline further Exports will continue to expand – but global slowdown a concern Inflationary pressures will increase Labour market conditions difficult, but signs of stabilisation GDP could contract in 2011, modest expansion in 2012 Credit the biggest issue
  11. 11. WHAT NEEDS TO HAPPEN TO ENGINEERRECOVERY? Sustainable public finances – we are borrowing too much Functioning banking system – NAMA? Competitiveness has to improve further Personal debt needs to be addressed – but widespread debt forgiveness too expensive Restore consumer confidence Create environment for private sector employment creation Repair badly damaged international reputation Strong leadership
  12. 12. EQUITY MARKET PERFORMANCEMARKET YEAR TO DATE (Sept 9th)S&P 500 -9.6%DOW JONES -7.2%FTSE 100 -12.0%DAX -24.9%CAC -21.8%NIKKEI -12.3%ISEQ -15.3%
  13. 13. S&P 500
  14. 14. FTSE 100
  15. 15. GERMAN DAX
  16. 16. THANK YOU!

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