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Activity in construction industry sees first slowdown in 6 years

Activity in construction industry sees first slowdown in 6 years

Activity in the construction sector contracted for the the first time in over six years in September, Ulster Bank’s latest Purchasing Manager’s Index reveals.

The PMI fell to 48.3 in September, a significant drop from 53.7 recorded in August.

Any figure under 50 signals a slowdown in a sector, while a figure over 50 signals growth.

September saw the first contraction in the construction industry since August 2013.

The slowdown was mainly accounted for by a fall in commercial activity, while the housing sector continued to post growth.

Ulster Bank noted that the housing PMI reading of 52.9 was still “comfortably” above the expansion threshold of 50.

It added that housing remained the strongest sub-sector for a ninth month in a row, though the pace of residential activity growth did ease to a four and a half year low in September.

Civil engineering firms posted their 13th consecutive monthly fall in activity, while commercial building decreased for the first time since July 2013, and at a solid pace.

Ulster Bank said that new business growth declined to its slowest pace in over six years as Brexit weighed on customer demand.

It also said the the Future Activity Index remained near August’s nine-year low with concerns about Brexit impacts the key factor affecting sentiment regarding the sector’s prospects for the incoming year.

As well as a smaller rise in new business, employment growth in the construction industry eased to an almost six-year low during September with firms expressing a reluctance to take on additional staff as a result of lower activity levels.

“Recent manufacturing and services PMI survey results have been signalling a deterioration in activity trends in some key areas of the Irish economy in recent months, largely reflecting the combination of weaker
global growth and growing risk of a no-deal Brexit,” commented Simon Barry, chief economist at Ulster Bank.

“The September results of the construction equivalent are suggesting that softer trends in the internationally-traded sectors of the economy are showing signs of spilling over into construction activity,” he added.

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Dublin market heading for big gain on Brexit hopes

Dublin market heading for big gain on Brexit hopes

Dublin’s ISEQ index is on track for its biggest one-day percentage gain this year, soaring more than 230 points (3.7%) this evening, boosted by optimism that a Brexit deal can be reached.

After holding talks yesterday in the UK, Taoiseach Leo Varadkar and British Prime Minister Boris Johnson said they saw “a pathway to a possible deal”.

EU negotiator Michel Barnier and his British counterpart Stephen Barclay, meanwhile, held a “constructive” meeting today, both the British and EU sides said.

Shares in the banks jumped in Dublin this evening with AIB surging more than 13%, while Bank of Ireland was up over 11% and Permanent TSB gained 7%.

Other shares recording strong gains included ICG, Ryanair, Cairn Home sand Dalata Hotel Group.

Irish government bonds also rallied today, outperforming their euro zone peers on hopes that a Brexit deal was in sight.

European markets were also higher this evening, with the Frankfurt DAX jumping 2.3%, while the Paris CAC had gained 1.7% and the London FTSE index was up 0.84%.

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China imports, exports down in September as growth cools

China imports, exports down in September as growth cools

China’s imports and exports fell more than expected in September, official data showed today, as US tariffs and cooling demand at home and abroad hit trade in the world’s second largest economy.

Globally, China’s exports dropped 3.2% in September from the same period last year, while imports dived 8.5%, according to data from the customs administration.

The figures were worse than a Bloomberg forecast, which estimated exports to drop by 2.8% and imports to fall by 6%.

The US is now China’s third biggest trade partner – after the European Union and the Southeast Asian trading bloc ASEAN – with imports from the US down 26.4% in September.

China promised to increase US agricultural purchases in a partial US-China deal announced on Friday, which also includes protections for intellectual property and opening up financial markets.

Engulfed in an impeachment inquiry, US President Donald Trump heralded the deal as a major breakthrough.

But it may only offer a temporary tariff reprieve because it lacks specifics and leaves the thorny issues such as unfair state subsidies to Chinese firms for later, analysts told AFP.

So far, the two sides have imposed punitive tariffs covering more than $360 billion worth of goods in two-way trade.

China’s trade surplus with the US narrowed 3.9% to $25.8 billion in September from $26.9 billion in August.

“We believe that as Sino-US trade negotiations have made progress and we expect further healthy development in bilateral trade,” said Li Kuiwen, a spokesman for Chinese customs.

China’s total trade surplus in September was $39.65 billion.

A major escalation in the trade war last month was “partly to blame” for the weak figures, said Julian Evans-Pritchard, of Capital Economics.

Washington imposed 15% tariffs on more than $125 billion in Chinese imports on September 1, and Beijing retaliated with its own fresh levies.

As a result, “the contraction in exports to the US deepened further, while shipments to the rest of the world held steady”, Evans-Pritchard wrote in a research note.

“With the mini US-China trade deal unlikely to alleviate the main headwinds facing exporters, it will take longer before growth in outbound shipments bottoms out,” he added.

Chinese imports, which declined for the fifth consecutive month amid cooling domestic demand, may also not see a strong recovery, he said.

Pork imports, however, surged 43.6% year-on-year in September after an outbreak of African swine fever decimated pig supplies in the country.

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Irish mortgage rates still higher than euro zone average

Irish mortgage rates still higher than euro zone average

New figures from the Central Bank show that Irish mortgage holders continue to pay the second highest interest rates in the euro zone.

The average interest rate on all new mortgages issued here in August stood at 2.99%, down two basis points since the beginning of the year but up from 2.98% in July.

This compares to the average rate of 1.48% for the euro area – a new record low. Only Greek mortgage interest rates higher than Irish rates in August.

Price comparison and consumer website bonkers.ie said that first-time buyers here are paying over €173 more on average every month compared to euro zone average.

Daragh Cassidy, from bonkers.ie, said that for all the talk of falling interest rates and a mortgage price war in recent months, the average rate in Ireland is down only two basis points since the beginning of the year.

This compares to a fall of over 30 basis points in the euro zone.

Mr Cassidy said there is still a lack of competition in the Irish mortgage market as it remains heavily concentrated in the hands of a few main banks

“Although competition has improved in recent times, it’s still below where it needs to be and this is leading to higher rates. The issue around home repossessions, and the inability of banks to take back a loan that has gone bad, is also a factor,” he added.

Today’s Central Bank figures also show that the volume of new mortgage agreements came to €753m in August.

This brought new home loan agreements for the first eight months of the year to €5.4 billion, up almost 12% on the same time last year.

The Central Bank noted that fixed rate mortgages continued to increase in popularity and accounted for 76% of new mortgage agreements.

The increase brings Ireland closer to the euro area preference for fixed rate mortgages, the Central Bank said.

Meanwhile, the bank also said that interest rates on new household term deposits remained close to zero in August, coming in at just 0.05%, as ECB rates remain at record lows.

The equivalent euro area rate stood at 0.33%.

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Tech tariffs may spark retaliation from China

Tech tariffs may spark retaliation from China

China has signalled it intends to hit back after the Trump administration placed eight of the country’s technology giants on a blacklist over alleged human rights violations against Muslim minorities.

Asked yesterday whether China would retaliate over the blacklist, foreign ministry spokesman Geng Shuang told reporters “stay tuned”. He also denied that the government abused human rights in the far west region of Xinjiang.

“We urge the US side to immediately correct its mistake, withdraw the relevant decision and stop interfering in China’s internal affairs,” Mr Geng said in Beijing.

“China will continue to take firm and forceful measures to resolutely safeguard national sovereignty, security and development interests.”

The White House’s move, announced after US markets closed, came on the same day negotiators from both sides began preparations for Thursday’s high-level talks in Washington.

A US Commerce Department spokesman said the “action is unrelated to the trade negotiations”, and China confirmed vice-premier Liu He would lead the delegation as planned.

Entities on the blacklist are prohibited from doing business with American companies without being granted a US government licence.

This now includes two video surveillance companies – Hangzhou Hikvision Digital Technology and Zhejiang Dahua Technology – that are said to control a third of the global market for video surveillance and have cameras all over the world.

Also targeted were SenseTime Group – the world’s most valuable artificial intelligence startup – and fellow AI giant Megvii Technology, which is aiming to raise up to $1bn in a Hong Kong IPO. Backed by Chinese e-commerce giant Alibaba Group Holding, the pair are at the forefront of China’s ambition to dominate AI in the coming years.

US equity-index futures fell on the news, reversing an earlier gain, while European stocks slipped. US futures also fell after China’s response.

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Manufacturer slowdown starts to hit jobs market

Manufacturer slowdown starts to hit jobs market

Jobs growth in manufacturing stalled for the first time since 2016 this month. A fourth consecutive month of weaker manufacturing conditions has started to feed through to weaker hiring data, according to a survey.

AIB’s Manufacturing Purchasing Managers’ Index showed a drop in new orders led to a further decline in output, with the index posting a reading of 48.7 in September.

“As a result of the setbacks in output and new work, employment among Irish manufacturing firms was unchanged from August,” AIB said.

“This marked the first time since September 2016 that employment had failed to rise.”

Purchasing manager surveys give an early insight into economic conditions well ahead of official data, and a reading below 50 indicates a contraction from the prior month.

Despite the weaker numbers, Ireland is still doing better than the eurozone, where the PMI reading for August dropped to 45.6.

While sentiment indicators, like the PMI series, have been showing weakness, so-called ‘hard’ economic data readings have remained relatively resilient, even in the eurozone.

Ireland’s economic growth was 6pc in the first half of this year, following a reading of 8.2pc in 2018, and most economists now expect it to outperform official forecasts of around 4pc for this year.

The weakening outlook recorded in the PMIs here has also seen work backlogs fall off sharply. Work outstanding decreased at its sharpest pace since July. “The weak Irish data of recent months clearly show that the sharp slowdown in global manufacturing over the past year or more is being felt in Ireland also. Brexit uncertainty is an additional negative factor weighing on activity here,” said AIB’s chief economist Oliver Mangan.

He added: “Meantime, sentiment among Irish manufacturers regarding future output, while still positive, fell to its lowest level in the seven-year history of the survey, as Brexit concerns mount.”

Irish exports are more heavily geared toward the United States, which is still growing at 2pc and where the Federal Reserve has far more room to cut interest rates than the European Central Bank. ECB policy rates are still pinned at zero a decade after the onset of the financial crisis.

Credit ratings agency S&P last week said it expected the eurozone to grow by just 1.1pc next year. It said governments needed to do more to boost the economy, as further cuts in ECB policy rates and a new bond buying programme would not be sufficient to rekindle growth.

The call was backed by outgoing ECB president Mario Draghi in an interview with the ‘Financial Times’.

Mr Draghi said that without help from government spending, ECB policies would be less effective, in a message aimed squarely at governments such as Germany and the Netherlands.

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Government will only borrow if it needs to for no-deal

Government will only borrow if it needs to for no-deal

The Minister for Finance has said €650m will be made available to support the Agriculture, Enterprise and Tourism sectors and to assist regions most impacted by a no-deal Brexit.

The money will be made available in the event of a no-deal.

€220 million of that would be deployed immediately.

From this, €110m will be made available for enterprises for the first wave of funding for targeted interventions to help “vulnerable but viable firms” adjust to a no deal Brexit.

Paschal Donohoe said the Government would only borrow money if it needs to intervene to protect the economy in the event of a no-deal Brexit.

Delivering his budget speech, Mr Donohoe said the Government would not borrow money for other purposes.

He said support by way of grants, loans and equity investments would include a €45m transition fund.

Among the additional measures would be €5m to Micro Finance Ireland and €5m for a Local Enterprise Offices Emergency Brexit Fund.

€110m will be provided through the Department of Agriculture.

The minister said the provision of supports to the beef sector would be a priority as would supporting the fishing fleet.

€40m of funding would be provided to the tourism sector.

€365m would also be provided for extra Social Protection spending on the Live Register and related schemes.

Simon McKeever, CEO of the Irish Exporters Association, said he cautiously welcomed the Budget measures to prepare the economy and business community for a potentially disastrous no-deal Brexit.

Mr McKeever said while he noted the Government’s budgetary constraints, he was concerned that the announcement of €110m for vulnerable, but viable, companies affected by a no-deal Brexit will not be enough.

“In this context, we are calling on the Minister for Finance and the Government to further clarify how today’s committed spending will be distributed between affected companies.

“There are serious concerns that a no-deal Brexit will lead to an immediate and accelerating deterioration in businesses’ credit profile and we are calling on the Government to clarify any measures to support and protect any such affected businesses,” Mr McKeever said.

The Irish Exporters CEO said he was worried about the small take up of the Brexit loan scheme so far, adding that more needs to be done to help companies understand, prepare for and mitigate the financial impact of a no-deal.

“The Irish Exporters Association calls on the Government to further engage in talks with the European Commission to investigate both national and EU-measures to support excessively affected businesses,” he added.

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€1.2 billion package to deal with Brexit – Donohoe

€1.2 billion package to deal with Brexit – Donohoe

The Minister for Finance and Public Expenditure and Reform Paschal Donohoe has today announced an overall package of over €1.2 billion to respond to the threat of a no deal Brexit.

Delivering Budget 2020 in the Dáil, Mr Donohoe said some of these funds will be spread across a number of departments and agencies to increase the level of staffing, upgrade port and airport facilities and invest in information technology.

Mr Donohoe has said that Brexit is the most pressing and immediate risk to the economy and today’s Budget has been influenced by the increasing likelihood of a no deal scenario.

The Minister said today’s budget was without precedent and the economy is poised at a point between the twin risks of overheating and Brexit.

Mr Donohoe said a no deal Brexit will mean a slower pace of growth here.

He said that while employment growth will slow, the economy can still expect an extra 19,000 new jobs to be created next year.

An increase in tax revenue is also in prospect for 2020.

But he added that the rate at which new jobs may be created could put pressure on tax revenues.

“The Government is clear about the challenges posed by Brexit,” the Minister stated.

The Minister said the Government had been preparing for Brexit since the UK referendum in 2016 and so far it has enhanced capacity at the country’s ports and airports.

It has also provided training and financial supports to increase the country’s customs capacity and recruited 750 new staff in key areas.

Mr Donohoe also said the Government had made €600m available through the Future Growth Loan Scheme and Brexit Loan Scheme.

The Minister told the Dáil that while a no-deal Brexit is not definite, the Government stands ready if it does happen.

He said the Government has eliminated the deficit and are projecting a surplus of 0.2% of GDP.

“In the event that the UK leaves the EU with an agreement, we will continue to build on this surplus. And in the event of a no deal, we will intervene in a sustained and meaningful way to support jobs and the economy,” the Finance Minister said.

Speaking on RTÉ’s Drivetime Mr Donohoe said: “Where we are with Brexit constrains us from doing other things that you would normally expect to do at Budget time but my attitude is that we have to be proactive about choices and decisions that we’re going to make to ensure that we can strongly manage what we can control because there are other things we won’t be able to control.

“So it’s because of this that we decided to put together a Budget on the basis of a no deal Brexit being the most likely scenario and unfortunately I think events of only today show that that was the right decision to take.”

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Fuel prices rise as Dáil passes Budget 2020 carbon tax increase

Fuel prices rise as Dáil passes Budget 2020 carbon tax increase

Some key taxation elements of Budget 2020 were passed by the Dáil last night, including the controversial increase in the carbon tax.

The number of deputies who voted in favour of the measure was 97, with only 36 opposing the increase and two TDs abstaining.

Accordingly, both petrol and diesel increased by 2 cent a litre at midnight.

The move was part of a Government plan to increase the price of carbon from €20 to €80 a tonne by 2030.

Taoiseach Leo Varadkar defended the increase in the carbon tax, saying it was about protecting the most vulnerable and addressing climate action.

“What we have done today is really significant,” he told RTÉ News last night.

The increase will come into effect for other fuels from May next year after the winter heating season.

Minister for Finance Paschal Donohoe said the funds raised would be ring-fenced to fund new climate action measures.

However, there was criticism of the move from members of the Opposition.

People Before Profit TD Richard Boyd Barrett said the €6 increase in the tax was regressive and punitive.

He said it would increase fuel bills for those who are struggling.

However, Green Party leader Eamon Ryan said it did not go far enough, saying it was a status quo Budget from a status quo Government.

He said it did very little when it comes to tackling climate change.

Sinn Féin’s Finance spokesperson Pearse Doherty said the Budget should have done more to give workers and families a break.

Labour leader Brendan Howlin said the poorest cohort of people would be worse off as a result of Budget 2020.

Other measures that were passed included increasing the price of 20 cigarettes by 50 cent, hiking the bank levy and also increasing stamp duty on the sale of non-residential property by 1.5%.

There were also measures passed to counter tax avoidance by large real estate funds.

Social Democrats co-leader Roisin Shortall said her party fully recognises the huge challenges facing the country in respect of Brexit, but the threat should not be used as some kind of cover for the Government in not addressing domestic issues in the Budget.

Speaking on RTÉ’s Morning Ireland, she said there were a number of challenges such as the housing crisis and serious problems within the health service and what was seen yesterday was an attempt to ignore these issues or address them adequately.

The Chief Executive of Irish Rural Link said rural communities are disappointed with the increase in carbon tax.

Séamus Boland said people will “take it on the chin” but the tax, which is designed to change behaviour, probably will not have the required effect because most people cannot afford to change.

Mr Boland added that the cost is even greater for households dependent on home heating oil and called for retrofitting to be made available “across the board” to low income households.

Further statements on the Budget will be heard in the Dáil shortly after midday, while Minister Donohoe will be on RTÉ’s Today with Sean O’Rourke from 10am.

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Pound falls as doubts grow over chances of last-minute Brexit deal

Pound falls as doubts grow over chances of last-minute Brexit deal

Sterling fell in early London trading today as investors grow increasingly concerned that Britain and the European Union were no closer to agreeing a Brexit withdrawal deal.

British lawmakers have passed a law requiring Prime Minister Boris Johnson to seek a delay to Brexit if the UK cannot agree a withdrawal deal by October 19.

But a report in the Daily Telegraph said Johnson intended to challenge that law, the Benn Act, in the Supreme Court.

Jane Foley, an analyst for Rabobank, said this week and next would be another “roller coaster” for the pound as it became clearer whether Britain and the EU would reach a deal and whether Johnson would challenge the Benn Act.

At current levels, the pound is pricing in a delay to Brexit beyond the October 31 level, and a degree of hope for a last-minute agreement with Brussels, Foley said.

“Before the EU summit there will always be a modicum of hope that there will be a deal,” Jane Foley said.

Boris Johnson has repeatedly vowed to take Britain out of EU on October 31 – raising the prospect that he will move further to reach an agreement than many think, or that he intends to push back against parliamentary efforts to block a no-deal Brexit.

The prime minister urged French President Emanuel Macron on Sunday to “push forward” to secure a Brexit deal and told him the EU should not be lured into the mistaken belief that the UK would stay in the EU after October 31.

Britain’s latest Brexit proposal has been rebuffed in Brussels.

Sterling traded 0.2% lower at $1.2311 this morning, while it was down 0.2% against the euro at 89.195 pence.

A series of disappointing economic data over the past week has added to worries about the British economy and the impact of Brexit-related political uncertainty.

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