Booming economy coming to an end?

junkyard

I've just been talking to a few people I know and they're convinced the booming economy we've been used to has come to or is coming to an end. The people I spoke to are in the service end of things, i.e. shop keepers, auctioneers and builders, and I'm seeing it myself in the motor trade. Is anyone else experiencing a similar downturn country wide or is it just around my area. I heard on the radio a few days ago that 89% of the population is relying on the construction industry, directly or indirectly, its a scary thought if this is actually the case. Has anyone any thoughts on the matter?:(

Dave!

I don't think it's much of a revelation that Ireland is too relient on the construction industry, mate! I don't think it's as grim as the picture you paint though. But you're right, the good days can't last forever!

shane86

The economy has apparently been at "ooh its gonna be ****ed next year" stage since at least 2000. September 11th was meant to be sending us to a level that made Thatchers Britain look like Hitlers 1930s Germany (economy wise ). 5 years and half of Eastern Europe working here later and we`re still on top. Tbh id say its still a long way off. Same with the house price crash, its been "coming" for 5 odd years now.

daveirl

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vector

I'm not an economist but...

as we enter winter things slow down (apart from the christmas rush), so if figures are to be produced lets compare October 2006 with October 2005 (ie year with year), and not October 2006 with July 2006 (ie Winter with Summer)

Baby4

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Afuera

junkyard wrote:

I heard on the radio a few days ago that 89% of the population is relying on the construction industry, directly or indirectly, its a scary thought if this is actually the case.

I don't think it's as high as 89% reliance on construction. I thought that there were about 15-16% of workers directly employed in construction and then another 5-10% in related industries (real estate, insurance, mortgage lending, etc). There may be a multiplier effect that would increase it by another few percent but I think 89% is stretching it too far. As it stands though it's still incredibly high for any country. Any slow down in construction will severely affect the economy in Ireland.

junkyard wrote:

Has anyone any thoughts on the matter?:(

I think that we are too tied to the American economic cycle. It's increasingly looking like they might be facing a recession there so if that happens we can probably expect a knock on effect here as well. It might be a good time to reduce any outstanding debts and diversify a little bit.

jank

2007-2007 is when we will see the real down turn.

Its not going to be pretty, but i think it nessesary as we have grown too cocky getting high of cheap credit, literally.

Just look at the drugs trade. Every tom dick and harry is using coke now. These are the same guys that have loans out to finance their lifestyles.

Sonnenblumen

Ignoring the spurious comments, my expectations that the boom will continue. I'm in business which links to building and we are swamped, eg our lead times (and this is no brag) for project quotations is longer than some others order list. That said I know plenty good professionals equally/more busy than us.

On a separate point, companies laying off/short weeks for sparks are doing something fundamentally wrong. I know no sparks who isn't busy.

A lot comes back to professionalism, and as I've seen in other threads there's a lot left to be desired amongst Irish trades/professions. But good ones will always outperform, and grow market share. Weaker operators will be more vunerable in dynamic markets.

junkyard

Sonnenblumen wrote:

Ignoring the spurious comments, my expectations that the boom will continue. I'm in business which links to building and we are swamped, eg our lead times (and this is no brag) for project quotations is longer than some others order list. That said I know plenty good professionals equally/more busy than us.

On a separate point, companies laying off/short weeks for sparks are doing something fundamentally wrong. I know no sparks who isn't busy.

A lot comes back to professionalism, and as I've seen in other threads there's a lot left to be desired amongst Irish trades/professions. But good ones will always outperform, and grow market share. Weaker operators will be more vunerable in dynamic markets.

I don't think we're all wrong in our area anyway, we're all experiencing the same problem, big and small businesses alike. The local builders are busy enough but the rest of us have experienced a major slow down.

shoegirl

junkyard wrote:

I heard on the radio a few days ago that 89% of the population is relying on the construction industry, directly or indirectly, its a scary thought if this is actually the case. Has anyone any thoughts on the matter?:(

I would say that statistic is extremely unlikely to be accurate. I#d say the actual figure is around 20%. The problem I see is that a lot of people are in relatively low skilled jobs and have few other skills - and are probably part of the 27% of the adult population who are functionally illiterate. Which means that if these kinds of jobs start to disappear there will be nowhere for these guys to go.

The other problem is that huge rises in costs such as rent, utilities, insurance, will make it very hard to compete in an increasingly competitive market. For example take the example of the Roches Stores closure in Cork. Apparently the landlord tried to raise the rent by 100% which is pretty unscrupulous to say the least. As a result he ends up with no anchor tenant so instead of just having a change of tenant he ends up with no tenant at all so he totally looses the income. He's priced himself out of the market here. But it gets worse, because apparently other tenants at the same shopping centre are now losing business as they have lost one of the main draws to the centre. So he ends up losing their business too, if smaller traders start to close. The danger here is that his gamble on attempting a 100% increase in income have actually not only caused him to lose the income through not having the large tenant to replace the original store, he ends up losing the income from smaller tenants also.

This is the kind of greed that is likely to close down some of Ireland, inc.

BigEejit

shoegirl wrote:

I would say that statistic is extremely unlikely to be accurate. I#d say the actual figure is around 20%. The problem I see is that a lot of people are in relatively low skilled jobs and have few other skills - and are probably part of the 27% of the adult population who are functionally illiterate. Which means that if these kinds of jobs start to disappear there will be nowhere for these guys to go.

The other problem is that huge rises in costs such as rent, utilities, insurance, will make it very hard to compete in an increasingly competitive market. For example take the example of the Roches Stores closure in Cork. Apparently the landlord tried to raise the rent by 100% which is pretty unscrupulous to say the least. As a result he ends up with no anchor tenant so instead of just having a change of tenant he ends up with no tenant at all so he totally looses the income. He's priced himself out of the market here. But it gets worse, because apparently other tenants at the same shopping centre are now losing business as they have lost one of the main draws to the centre. So he ends up losing their business too, if smaller traders start to close. The danger here is that his gamble on attempting a 100% increase in income have actually not only caused him to lose the income through not having the large tenant to replace the original store, he ends up losing the income from smaller tenants also.

This is the kind of greed that is likely to close down some of Ireland, inc.

89% seems extremely high alright, although there is the possibility that the cash generated by the building industry has filtered out a lot more than the 20% you guess ... I would guess (and thats all we can all do isnt it) up to 30%..

Your other point about the greediness in Ireland is spot on, some people would stab their grandmothers for some easy money in todays Ireland ... sometimes it feels like everyone is trying to screw/extract the maximum amount of money they can for every little thing ... there is rarely a fair price anymore

(/me puts on asbestos undies)

junkyard

Tbh I'd say there are other plans for Wilton shopping centre like redevelopment and thats why the place is being run down so smaller shops will leave too and they can start with a clean slate rather than pay off existing tenants.

lomb

i reakon the loss of confidence will hit first in rural ireland, then in non dublin cities etc, and then possibly in dublin.
there is definately a bubble in certain irish property, and when supply tips demand, kabboom!
on the other hand some reackon as long as ireland is prosperous people will come adn soak up the supply.
but its all based on confidence and on willingness to take on credit. when this evaporates then discretionary spending/high bids on property will taper off.
undoubtadly cars are where one sees it worst in some respects as no one needs a new car, when a 2 grand car does the same 'thing'. confidence is what buys new and expensive cars.

D'Peoples Voice

lomb wrote:

undoubtadly cars are where one sees it worst in some respects as no one needs a new car, when a 2 grand car does the same 'thing'. confidence is what buys new and expensive cars.

IMHO Pubs will take an unmerciful hammering this christmas.
Both from the clampdown on drink driving and the fact that people have far less surplus cash to spend on beer!
Wine sales will soar!!!!

DublinDilbert

I would say the amount of people working in the construction industry is closer to 30%... There's even a huge amount of work in finishing off / kitting out apartments & houses, ie for the 90K units completed this year, that's 90K floors that need tiling, 90K washing machines that need to be bought ect...

90K washing machines, is alot of washing machines!! Add on 90K sofa's, 90K TVs ect... furnishing these units is an industry in itself! And with banks giving 110% mortgages, there's plenty of money out there for kitting these units out...

SimpleSam06

junkyard wrote:

Is anyone else experiencing a similar downturn country wide or is it just around my area.

That depends on where your area is, one of the websites in your sig is made by a company in Russia, according to the alphabet. I'm sure the other one is too, drivinginfo.ie. You'd be much better off sticking to a site made in Ireland, like www.LIreland.com, for example. You may be experiencing a slowdown for that very reason. Are you part of the problem?

The official figures for construction in industry put that and its dependents in and around the 25% mark. That is not insignificant; note that in the height of the American great depression, the economy had dropped by 29% at its worst. I think on the whole we have a rough time ahead, and its people with savings that will come out ahead. I feel sorry for anyone who has bought property in the last five years.

Not to worry folks, we still have tourism!

BigEejit

SimpleSam06 wrote:

Not to worry folks, we still have tourism!

hehe, lots of people will be having their holidays at home ... thats good for tourism isnt it

junkyard

SimpleSam06 wrote:

That depends on where your area is, one of the websites in your sig is made by a company in Russia, according to the alphabet. I'm sure the other one is too, drivinginfo.ie. You'd be much better off sticking to a site made in Ireland, like www.LIreland.com, for example. You may be experiencing a slowdown for that very reason. Are you part of the problem?

The official figures for construction in industry put that and its dependents in and around the 25% mark. That is not insignificant; note that in the height of the American great depression, the economy had dropped by 29% at its worst. I think on the whole we have a rough time ahead, and its people with savings that will come out ahead. I feel sorry for anyone who has bought property in the last five years.

Not to worry folks, we still have tourism!

Well to be fair, I support them because they support me and they're both Irish related companies. Its not just me experiencing problems, suppliers and other businesses are suffering a similar slow down.

Do-more

As I see it confidence is definitely on the down-swing. With gas and electricity prices taking huge leaps, peoples' disposable incomes are being eroded, add in interest rate increases on mortgages and car loans and it bites even further. These increases may not affect everyone but they do affect a sizeable number. Only last week I overheard a seemingly well-heeled looking woman in Lidl saying she couldn't afford to shop at Tescos any more! She certainly won't be buying too much in local shops so...

As for the housing market I think it's a real "house of cards" according to the statistics 40% of new houses were bought by investors last year. Around my way a €320,000 apartment can be rented for €650 a month but the repayments would be €1650 a month over 30 years if you were to buy it. So an investor could only be buying it in the hope of capital appreciation, if house prices stop rising (looks like they may have already) then investors will most probably stop buying. Then we have a situation where at least 5 - 10% of the workforce are facing unemployment directly as the developers will pull back on building. The knock-on effects could be grave. As was pointed out before, furniture and electrical shops will be affected laying of staff too and general economic confidence will be hit hard as many worry about their own job security. The list of people affected is almost endless from people behind deli counters, because the builders aren't coming in for their breakfast rolls to newspaper staff because of lost property advertising revenue etc.

It will be interesting to see what comes out of the budget in regard to stamp duty as a reduction could be enough to fuel the growth for another 6-12 months, unfortunately the higher we climb the further we have to fall!

BigEejit

Do-more wrote:

.............unfortunately the higher we climb the further we have to fall!

nuff said

Sonnenblumen

BigEejit wrote:

nuff said

You remind me of the guys who believe the world is flat!

BigEejit

Sonnenblumen wrote:

You remind me of the guys who believe the world is flat!

looks flat from where I'm standing

Do-more

Sonnenblumen wrote:

You remind me of the guys who believe the world is flat!

All I can say my old sunflower is, if you think a 4" solid costs €1, you don't have a very good view on things!;)

chump

I'd be of the opinion we're heading into a bit of a dip alright. Mainly precipitated by rising interest rates, ridiculous debt levels and over-reliance on construction.
I can see interest rates continue to rise into 2007, and who knows when they'll stop.
Our ridiculous debt levels aren't going to be dented without vast wage increases - and if that happens we're screwed on competitivity grounds
Our over-reliance on construction will naturally decline somewhat due to falling demand in homebuilding, but increases in public spending on infrastructure will soften any fall here.

We're had it good for all my memorable adult life (24), I can't imagine what hard times must be like, anecdotes aside. I strongly believe there are a large porportion of my generation who don't believe we'll ever see 'tough' times again.

Hopefully we wont!

Colonel Sanders

Surely the effects of 'rip off ireland' will have to bite at some stage as we price ourselves out of most industries that do not suffer from industrial inertia. Rising energy costs put pressure on most industries but manufacturers in particular. Look at the closure of the Cadburys factory last week.

Take a worst case scenario: A rise in unemployment (=> increased social welfare cost) matched with irresponsible public sector wages and pension benefits. The result is either/or a rise in taxes or reduced infrastructural spending which will erode our competitiveness further. Add in rsing interest rates and we could be in trouble. It will be interesting to see how it pans out and how people financing over lavish lifestyles on cheap credit cope.

D'Peoples Voice

Colonel Sanders wrote:

It will be interesting to see how it pans out and how people financing over lavish lifestyles on cheap credit cope.

Here's a thought,
in 2002, we were led to believe by the opposition parties that the country was falling into economic decline. So at the 2002 elections, FF got elected because people had more confidence in them during a recession than FG/Lab after their failed policies of the 1983-86 period.
Now approaching 2007, we are again approaching difficult times, who do you think people will vote in to get us through the difficult times.

Pa ElGrande

D'Peoples Voice wrote:

Here's a thought,
in 2002, we were led to believe by the opposition parties that the country was falling into economic decline. So at the 2002 elections, FF got elected because people had more confidence in them during a recession than FG/Lab after their failed policies of the 1983-86 period.
Now approaching 2007, we are again approaching difficult times, who do you think people will vote in to get us through the difficult times.

If the major opposition parties (what opposition?) performance over the past term is anything to go by then it appears the more rope the current incumbents give them the more they tangle themselves in it. The only danger to the current government come the elections is low turnout. Times are good, better than they've ever been, without an economic shock there will be no major change.

Sonnenblumen

Do-more wrote:

All I can say my old sunflower is, if you think a 4" solid costs €1, you don't have a very good view on things!;)

OK Moron why not ring the KCR Builders Providers (tel 01-490 8283/ 490 8765) and report prices back to class!

You can quote incl/excl VAT.

After that, change the sheets!!

shoegirl

Do-more wrote:

As for the housing market I think it's a real "house of cards" according to the statistics 40% of new houses were bought by investors last year. Around my way a €320,000 apartment can be rented for €650 a month but the repayments would be €1650 a month over 30 years if you were to buy it. So an investor could only be buying it in the hope of capital appreciation, if house prices stop rising (looks like they may have already) then investors will most probably stop buying.

Ironically I think what has artificially propped up the building industry is twofold:
a) net immigration - lots of Eastern European builders coming over need somewhere to live - so they can build lots more building for other eastern European builders to live in!!
b) the non-building of social housing - note that fingal co co are advertising "affordable" housese for sale to "poor" couples earning up to 150k (which is very definitely high level executive/professional income rates) - meanwhile there are huge waiting lists for social housing - who end up - inevitably - falling back on the private rented sector - which again keeps this sector artificially afloat.

The irony is that the hostility against eastern europeans which has contributed to demands to keep the latest round of EU entrants out of the job market is based on the assumption that immigrants are taking out more than they give - when in fact what does seem to be happening is sub-economies developing to meet their needs - anybody else apart from me noting the growing "boom" in ethnic foodstores and the importation of commodities from Eastern Europe and Asia? There's obviously a huge market for this.

They ain't stupid either. While its true that a lot of migrants are ripped off when they arrive here first, new EU citizens are pretty quick to clue on to this and walk away from rip-off employers pretty damn quick. They didn't come here to work on the cheap - they came here to get the same as you or I would want. And why not?

I do think, however, that we have two other huge problems in Ireland:
a) an almost total dependence on imported oil and gas for energy.
When the Seven Heads field was being developed (being designed and built for the oilfield conglomerate I worked for at the time) I remember seeing company propoganda that told us that if Seven Heads would provide as much as 90% of Ireland's gas needs within a few years, and without it, Ireland would end up importing about 90% of her gas needs.
Well guess what happened - Seven Heads turned out to be a disaster and so Ireland is now important 90% of its gas.
Ironically, potentially good sources such as wind farms and the Corrib development are being fought tooth and tail by those impacted by their development - though of course these may themselves - if they ever are built - may also turn out to be the kind of also-ran that Seven Heads turned out to be.
The problem is though - where we will find energy sources if costs keep soaring?
b) heavy dependency on economies such as the US and UK, which are both potentially (esp the US) teetering towards depressions, and in the case of the US receiving majorly negative political feelings against companies which are "unpatiotic" insofar as investing in low-tax countries like Ireland as opposed to back home.

I am noticing particularly negative figures coming from the US right now, with falls in the housing market and weak trade figures. If the dollar continues to fall it make Ireland a less attractive place to invest US funds. That isn't a good thing.

junkyard

Some good points there shoegirl, wind power should be encouraged all the way. As well as being a clean source of energy there are plenty of locations too. Solar energy is never going to happen at decent level in this country. There's no doubt the economy is very shaky contrary to popular belief, certainly its shaken a lot of people in my area of late and doesn't seem to be getting any better.