Last issue

Included this week:

  • A comment on the developments in the Banking Sector
  • House Price Index
  • Planning Permissions Granted
  • CPI
  • National Accounts
  • Industrial Production
  • Services Production Index
  • New Vehicle Registrations

The ECB raised a further 50 bps today, this was considered all but certain up until the back end of last week when developments in the banking sector in the US put financial stability concerns to the forefront. A gross oversimplification of what happened:

  • California regulator closes Silicon Valley Bank and appoints Federal Deposit Insurance Corporation (FDIC) as receiver.
  • Bank shares fall in US & Europe, giving back much of the gains year to date.
  • Signature Bank was the next to fail. Reuters “the second largest in U.S. history behind Washington Mutual, which collapsed during the 2008 financial crisis. Investors were unnerved by the speed at which startup-focused SVB, the 16th largest lender in the U.S., was toppled by customer withdrawals.”
  • Credit Suisse main investor at the Saudi National Bank publicly announced it would not be investin further. Claiming that not only was this to avoid going above 10% and subsequently being subject to additional regulatory scrutiny but that there were “many reasons”.
  • The Swiss Central Bank had to step in providing liquidity.
  • Following the rout, the spokesman for the Saudis claimed there was “a little bit of panic.” - As of writing this Credit Suisse recovered to levels prior the sell-off.


Credit Suisse has been involved in what feels like an endless array of scandals over the years. With the backdrop of weakness in the US, reporting irregularities leading to a delay in the annual report and finally a less than glowing appraisal from it’s main shareholder was enough to drive a sell off.

At one point on Wednesday the 15th Credit Suisse was down 30% in the session.

At one point on Wednesday the 15th Credit Suisse was down 30% in the session.


Negative sentiment in the US often spreads, the fear of contagion can lead to banks being tested even if they are solvent. An corrlation of indices for the US banks and the European banks can be seen below.

US & European banks are positively correlated, the red area shows where the observations tend to coalesce. I've labelled the 10 worst days for the KBW Nasdaq Bank Index. Very bad days for the US are often very bad days for Europe.

US & European banks are positively correlated, the red area shows where the observations tend to coalesce. I’ve labelled the 10 worst days for the KBW Nasdaq Bank Index. Very bad days for the US are often very bad days for Europe.

Above shows the previously mentioned indices along with Bank of Ireland and Credit Suisse for context.

Above shows the previously mentioned indices along with Bank of Ireland and Credit Suisse for context.

House Prices

House Price Index (RPPI)

The national house price inflation for January is 6.1%. This represents a -1.6 change from December which was 7.7%.

Prices: 12 Month Rolling Average


Planning Permissions

Commencement data is unavailable for the House and Apartment split in the public domain.

Commencement data is unavailable for the House and Apartment split in the public domain.

Planning permissions on a rolling total basis sees it's sharpest decline in the five year sample shown above.

Planning permissions on a rolling total basis sees it’s sharpest decline in the five year sample shown above.

While completions are increasing at a decreasing rate, units recieving planning is decreasing at an increasing rate. - For both apartments and houses. The supply side pressure are set to continue, aside from a significant increase in commencements in the coming months.

While completions are increasing at a decreasing rate, units recieving planning is decreasing at an increasing rate. - For both apartments and houses. The supply side pressure are set to continue, aside from a significant increase in commencements in the coming months.


CPI

Year on Year

Contribution to Inflation

The composition of the 8.5% CPI can be seen below.


National Accounts

The Flash estimate for GDP was reviewed in week 1 for Feb, there have been meaningful revisions for Ireland.

GDP

The Q4 2022 figure came in weaker than expected, the flash estiamte had this figure ar 3.5%. - Now it is 0.3%.

The Q4 2022 figure came in weaker than expected, the flash estiamte had this figure ar 3.5%. - Now it is 0.3%.


Industrial Production

Ireland returns to growth, weakness for France and Germany.

Ireland returns to growth, weakness for France and Germany.


Services Index

Most sectors recovered pandemic losses, if there were any. With most stabilising last year.


New Car Sales

New vs Secondhand

The three month variation on the 12 month moving average appears to respond as we would expect to economic downturns. - Particularly the new vehicle series. The three month variation was chosen as it was less noisy and easier to interpret over a monthly variation. The year on year series had a standard deviation of 18 and 32 percentage points for new and secondhand respectively, making the 3 month a reasonable middle ground.

The three month variation on the 12 month moving average appears to respond as we would expect to economic downturns. - Particularly the new vehicle series. The three month variation was chosen as it was less noisy and easier to interpret over a monthly variation. The year on year series had a standard deviation of 18 and 32 percentage points for new and secondhand respectively, making the 3 month a reasonable middle ground.


Fuel Type

Traditional vehicles in decline, so the traditional metric for measuring the economy may be less insightful than in previous downturns. Government grants for electric vahicles will have lead to some degree of substitution.

Traditional vehicles in decline, so the traditional metric for measuring the economy may be less insightful than in previous downturns. Government grants for electric vahicles will have lead to some degree of substitution.