The consensus forecast for global growth in 2012 has moved down in recent months, reflecting weak manufacturing data over the autumn and an expectation that growth in Europe will be very weak amid signs that the final quarter of 2011 saw GDP contracting in both the euro area and the UK. Indeed, some forecasters foresee both experiencing a mild recession before recovering some ground in the second half of 2012, although the December data implies some stabilisation.

The ECB has responded to what it now sees as downside risks to growth by cutting interest rates and we still expect further monetary easing, with the repo rate moving to 0.75% over the next few months. The Bank is also injecting huge sums into the money market, including the provision of 3 year funds, which may also ease government funding concerns as banks may well use this money, at least in part, to purchase government debt.

Inflation proved a common problem for most economies last year, largely reflecting higher energy and other commodity prices, and in the absence of an oil price spike inflation rates are likely to fall this year, so providing some support for consumers. This is particularly true in the UK and the Bank of England expects inflation there to end the year well below 2% from the current 4.8%. The BoE’s current forecasts are also consistent with further monetary easing, although with official rates already down at 0.5%, any additional measures are more likely to come in the form of more asset purchases.

The US, in contrast to Europe, has ended 2011 on a brighter note as evidenced by a pick up in consumer confidence and spending, an acceleration in the pace of employment growth and some signs that the housing market may have bottomed. The US manufacturing sector also proved more resilient than elsewhere, and did not experience the mild contraction seen in the global data, although December did see a return to expansion outside Europe. The unemployment rate in the US is still very high by recent historical standards, despite the recent move down, and for that reason the market is not expecting the Federal Reserve to raise rates until mid 2014, although the Fed now intends to publish its own rate forecasts to give further guidance.

The relative growth picture outlined above is not consistent with a significant euro appreciation in our view, although we would stress that the market positioning is unusually extended having established a large short position in the euro/dollar. On that basis, we would not be surprised to see a short-term euro rally at some stage, but still expect a rate between $1.25 and $1.30 to prevail over the coming months, with downside risks for the single currency. Against sterling the range may be 81-85 pence.

Dr. Dan McLaughlin

A huge focus of the launch of the IEA report on the Top 250 Exporters was on the Information and Communication Technology (ICT) sector.

This is not surprising due to the growth in this area over the last few years with new global giants such as Google, Facebook and eBay setting up their European headquarters here.

John Whelan, CEO of the IEA, told the attendees of the launch that Ireland is now seen as the cluster location to be in for the ICT sector. This sector is going to be increasingly important going forward as Ireland continues to expand its cloud hosting capabilities. Mr. Whelan’s speech is available to watch in our exclusive videos section.

This was highlighted by some of our National Enterprise Week speakers especially Paul Rellis of Microsoft, and Justin Keatinge of Version 1.

At the conference Rellis spoke about the technological transformations that are taking place and how natural user interfaces such as Kinect will become more pervasive in the near future. It is predicated that in three years time 50% of phones will be smartphones, and according to Rellis one third of those will be on the windows phone platform. 

Speaking at the launch of the report Minister for Trade, Jan O’Sullivan, said that while multinational companies are important indigenous Irish companies are key to Irish economic stability and growth. You can watch Minister O’Sullivan’s speech in our exclusive videos section.

Justin Keatinge’s company, Version 1, is just that. We spoke to him at National Enterprise Week and he explained his experience of building a successful company in this sector. You can watch the interview here.

What do you think about the potential for growth within this sector? Will it live up to the high expectations?

They say that you can tell a lot about a society by its advertising. If this is true, Irish society has shifted in the past twelve months as ‘staying in’ is becoming the new ‘going out’. You may have seen brands capitalise on this with changes in their messaging such as the new Smirnoff ‘Dress up and Stay in’ ads.

TV stations are also updating their programming with new shows such as RTÉ’s ‘Take on the takeaway’. This new show features celebrity chefs such as Kevin Dundon compete against the contestants’ take-aways to try to beat them in the area of price, speed of delivery and taste.

As consumers demand better value on their weekly shop, they are turning to review websites and forums to find out where to shop and what products to buy. One website that is catering for this effectively is CheapEats – a blog about eating well in Ireland while getting value for money.

…

In a time when the media is full of doom and gloom it is brilliant to see Irish companies that are bouncing back from the brink.

Waterford Crystal, which went into receivership last year, has returned home to the south eastern capital with a new manufacturing facility and visitor centre opening last week.

The announcement of receivership was a terrible blow for staff and the region generally with the hospitality industry in the south east depending on Waterford Crystal to bring in over 300,000 tourists.

The new venture is the result of a partnership between KPS Capital Partners, who bought the brand out of receivership, and Waterford City Council. …

Ernst and Young issued a Europe-wide report today with some good news for Ireland.

After two years of contraction the economy is predicted rebound dramatically in 2011. …