National debt on the up

The National Treasury Management Agency (NTMA) was set up by the Government in 1990 with the specific purpose of managing the National Debt and borrowing on behalf of the state, jobs previously carried out by the Department of Finance and the Central Bank. Money is borrowed by the NTMA in a variety of ways. Some of it comes from personal savings invested in An Post. For instance, if you put money into Post Office Savings Certificates, you are actually lending the money to the Government through the NTMA. Other funds are borrowed from financial institutions on either a short or long-term basis. Most new funding is raised by the sale of Government bonds. These are not unlike IOUs. A financial institution lends the money and in return they get an IOU (the bond) that provides a promise to repay the money at a fixed date in the future known as the maturity date and to pay interest each year.

This afternoon, the NTMA said Ireland's national debt at the end of 2008 stands at €50.7 billion, up by €13 billion on last year. The Government had originally forecast in last year's budget that the national debt would rise by €4.8 billion. For next year, the Government had forecast borrowings of €18.4 billion but this does not include any additional funding required since Budget 2009 in October or the recapitalisation programme for the banks announced earlier this month. The NTMA also revealed today that the National Pension Reserve Fund fell in value by 29.5% last year, which the government plans to tap for the bank bailout. The National Debt GDP ratio also increased from 24.8% last year to 41.3% this year.

You can read their report here.

10% unemployment before Easter?

Ireland's main body for personnel managers, the Chartered Institute of Personnel and Development (CIPD), predicted yesterday that redundancies will soar to about 2,270 a week in the period between New Year and Easter, sending unemployment above the 10% mark. CIPD Director Michael McDonnell said employees would feel the full effect of "the triple whammy" of the bursting property bubble, the global recession and the crisis in financial markets. "The ripple effects are already spreading out from the construction and property market epicentre to hospitality, retail, travel, personal and professional services firms", Mr McDonnell said. He believes some employers have held back from job cuts but lack of access to bank credit, falling consumer demand and the relative strength of the euro against a weakened sterling will force their hand.

Supply of teachers up

The number of people interested in becoming teachers in England has soared since the start of the economic downturn. The Training and Development Agency for Schools (TDA) has reported a 40% increase in inquiries to its website since March, the beginning of the credit crunch. The number of people eligible to teach maths is up 25% on the same period last year, and the latest figures show the TDA has beaten its overall recruitment target by 2%. A spokeswoman said the increased interest in teaching was a result of the tougher economic climate. The number of people registering an interest in changing career to become a teacher has also risen – by 13% year on year – as graduates and career-changers seek more secure career paths in the wake of financial instability, the TDA said. Graham Holley, chief executive of the TDA, said: "There's a lag between people who express an interest in teaching, and those going on to become teachers. But even a 1% increase at that end means 4,000 new teachers. "In my experience, the level of interest is completely unprecedented. I've never seen anything like it. "Teaching is already pretty popular and a top choice for career changers. If you add to that the credit crunch, it means there's an accelerated movements towards teaching."

Shanghai drops low

A recent survey by the official Shanghai Securities News and Stock Star showed that over 60% of the 25,110 respondents had lost nearly 70% of the money they invested in the Chinese stock market in 2008. Only 6% of the respondents said they had made money in the past year, the China Daily reports. The survey also showed that more than half the respondents said they were "fully" invested in equities while 30% said they had kept on buying in the past several months in the false belief that the market had bottomed out. As financial opportunities in China are more limited than in the West, investments in shares are undertaken by a wider section of society than here.

I should cocoa

London cocoa futures have hit a 23-year-high as cocoa turned out to be the most lucrative commodity in 2008. Cocoa for delivery in May peaked at £1,820 per tonne in London, which was its highest price since October 1985. Cocoa traded in the US has also been rising, although not as strongly because of the strength of the dollar.

Most commodities are priced in dollars, even in London trading, but London cocoa is priced in sterling, meaning traders can benefit from the weaker currency. There are concerns about falling cocoa production in Africa, while demand for cocoa is holding up much better than other commodities in the downturn. The three largest producers of cocoa are Côte d’Ivoire, Ghana and Indonesia. Between them they account for over 70% of global production.

Anglo-Irish Bank nationalised in all but name

The Government announced plans on Sunday to recapitalise the country's three biggest banks. A total of 5.5bn euro will be injected into the Allied Irish Bank, the Bank of Ireland and the Anglo Irish Bank in return for shares. Anglo Irish will receive 1.5bn euro in return for 75% shares with an annual fixed dividend to government of 10%. This means the bank is effectively being nationalised. The Government will give 2bn euro each to Bank of Ireland and Allied Irish Bank for an annual dividend of 8%. They will also receive 25% voting rights on their respective boards.

There have been widespread calls for the scheme to be dependent on changes to the management of the banks. However, Taoiseach Brian Cowen said that would not be a precondition.

Morgan Kelly, Professor of Economics, UCD, wrote an excellent critical appraisal of the government's recapitalisation of Anglo Irish in Tuesday's Irish Times. You can read it here.

On Tuesday evening, NUIG economist, Dr Alan Ahearne, was interviewed on RTE's Drivetime Show and he gave his view of the Anglo Irish recapitalisation. He asks if the markets think Anglo Irish is unsaveable why is our government putting money into it? You can listen to the 9 minute interview with Mary Wilson here.

Aer Lingus to fly Shannon-Heathrow again

Aer Lingus has announced its intention to resume flights between Shannon and Heathrow Airport near London from March of next year. The airline attracted much criticism when it scrapped the flights earlier this year in favour of services between Belfast and Heathrow. However, it now says it will resume twice-daily flights to and from Shannon in March 2009. The decision follows the recent agreement by staff to accept work practice changes at Cork, Dublin and Shannon airports.

PS3 vs Xbox

PS3 sales in the US declined in November, according to figures released by the NPD Group: Sony sold 378,000 consoles last month compared with 466,000 in November last year. In contrast, sales of Microsoft's Xbox 360 went up to 836,000 from 770,000. Nintendo outsold both by a wide margin - just over 2m Wiis sold, up from 1.35m a year earlier. The figures must concern Sony, though there are variations in market share around the world. Nintendo seems to be winning everywhere, but the PS3 is way ahead of the 360 in Japan, and also easily outsells Microsoft in countries such as Spain, Portugal and Italy, according to Ed Barton, games analyst at UK-based Screen Digest.

Sony's big problem is price, especially in the present economic climate. In the USA, the PS3 costs $399, compared with $199 for the cheapest 360, the hard-drive-less Arcade. In the UK, the 360 Arcade is £129.99 and has gone for as little as £99.99 at retailers such as Zavvi, while a PS3 costs from £280. The PS3's unique selling point, the Blu-ray drive for high-definition (HD) films, looks less compelling now that cheaper standalone players have emerged, and customers are reluctant to shell out for suitably large HD screens that they need to enjoy the full benefit. Microsoft cut 360 prices aggressively in September, but Sony did not follow its lead, telling analysts that it is putting profitability ahead of market share.

The 360's lead in North America will be difficult to overcome, but Barton thinks 2009 will be much better for Sony worldwide: he argues that Microsoft's deep price cuts for the 360 will be hard to repeat, that Sony has strong PS3-exclusive games in preparation, and that the PS3's strength as an HD source will help it in the long term. He is predicting a 60% increase in the PS3's worldwide sales next year, to 16m, more than double his projected Xbox sales of just under 8m units. Few would be surprised if Sony dropped PS3 prices next year, and there is scope for a cheaper version of the console.

The PS3 will probably always be more expensive than the 360, but it is worth looking beyond the headline price. The 360 you really want is not the low-end Arcade edition, but the Premium, which has a hard drive. If you then add the cost of a wireless network adapter and a rechargeable battery for the controller - both of which are standard in the PS3 - the price difference reduces. Bottom line: the console wars are not over yet. What is certain, though, is that Sony has lost the dominance of the market. It is also remarkable that Microsoft has been forced to undercut the Wii (around £180), yet still sells fewer units despite superior graphic capabilities. Microsoft has always argued that software matters more than hardware; ironically, it is Nintendo that demonstrates the truth of that point.($199) is closer to that of Sony's 8-year-old relic than its current-gen upstart.

Shhhh! We are having a sale - but don't tell anyone!

Secret sales seems to be how some sellers of highly income elastic goods (or in some cases Veblen/snob goods) are dealing with the recession. Sarah O'Connor writes in today's Financial Times about luxury retailers who do not wish to put gaudy 'Sale' signs up in their business. Instead, they are are inviting customers to discreet events or selling stock cheaply through 'private sale' websites. The reason? They fear that if they explicitly reduce their prices through a conventional sale, the perceived high quality and more importantly the exclusive status their goods enjoy will be tarnished.

Luxury retailers resort to secret sales, Financial Times, 20.12.2008.

P.R. stunt by Cowen & Co.?

Up to €500m is to be invested by the Govt in a new venture fund, to be known as Innovation Fund Ireland, which will support early stage research and development. The announcement was made at the launch of what the Government calls 'Building Ireland's Smart Economy: A Framework for Sustainable Economic Renewal' . Under the renewal programme, multinationals will also be encouraged to engage in 'innovative high value activity and technological convergence' which will provide quality jobs.

Minister for Health, Mary Harney said the plan required a national effort like that in the mid-1980s when she said the country 'nearly went under'. The renewal programme also introduces a plan to drive entrepreneurship and business start-ups by introducing what the Government calls 'highly favourable taxation measures'. These include a three year exemption from Corporation Tax for these new businesses.

Responding to the announcement, business group ISME said it was dismayed, calling the plan 'vague, bereft of ideas; deficient in specifics, measurements and timeframe.' Fine Gael spokesperson on Finance Richard Bruton criticised the Government’s plan saying: ‘For all the benign aspiration in the document today it is worth recognising that you can’t build a smart economy based on dumb decisions.’ It was also dismissed as a PR exercise by Labour Party leader Eamon Gilmore. In the Daíl this morning Deputy Gilmore pointed to the fact that the announcement was not going to be made in the Houses of the Oireachtas, but in Dublin Castle. Referring to Transport 21 and the National Development Plan, he said that documents launched in the Castle are not worth the paper they are written on. Fine Gael leader Enda Kenny said that members have been left without any information on the plan, and that was contemptuous treatment of the House. He said his understanding of the framework is that it is 'high on vision and low on specific ideas'.

Massive losses for CIE in 2008

The Minister for Transport, Noel Dempsey, has told the Dáil that CIE will make a loss of €39.5m this year, compared with a €1.47m loss last year! He said the loss was a 'significant deterioration' and was due to a drop in revenue, increased costs and higher fuel costs in the early part of the year. Mr Dempsey said CIE would have to reduce its frequency of service and withdraw some routes altogether.

A CIE statement said the group - Iarnrod Eireann, Dublin Bus and Bus Eireann - was facing a more difficult financial situation in 2009. It said the three companies were looking at 'a wide range of options' to address the deteriorating financial situation. 'All aspects of the cost base are being examined for potential cost savings,' CIE said. But it added that no decision had yet been made on the final measures to be taken.

Sir Richard Branson says the economy is 'f***ed'!

Sir Richard Branson has delivered a characteristically blunt verdict on the state of the economy, describing it as "f***ed". But Britain's cheeriest billionaire said that he hoped that the downturn might only last a couple of years instead of becoming a repeat of the Great Depression of the 1930s as so many economists now fear. The Virgin boss was asked his views on the economy by Five News. “I was going to say, it’s f***ed, but I think I had better not have said that,” he replied. He added: “I think it is a terrible, terrible mess, which has been brought upon us by some very irresponsible people in the banking community, some very lax regulation and we are going to have to work hard to dig ourselves out of it.

“I think governments have moved quickly and hopefully it will be a two-year, two or three-year nightmare not a 1929 nightmare. But we are all going to have to work very, very hard to get things back on the even level.” A spokesman for Sir Richard said: “He’s only saying what everyone’s thinking, in a more forthright way. He was making the point that the economy is in dire straits. It’s nothing that hasn’t been said every day for the last three months.”

US interest rates now virtually at zero

The US Federal Reserve has tonight slashed its key interest rate from 1% to a range of between zero and 0.25% as it battles the country's recession. Wall Street shares soared after the Fed, the powerful US central bank, stunned markets by cutting interest rates from an already 50-year low of 1% to virtually nothing. In its statement, the Federal Reserve predicted that rates would stay at the current exceptionally low levels "for some time". It added that it was considering ways it could spend money on supporting the economy and credit markets. Analysts said that the key rate is now virtually zero. "Whether it's zero or 0.25% actually does not make a huge difference," said Holger Schmieding at Bank of America. He added that the more important factor is what policymakers plan to do now that they cannot cut interest rates any further.

The Federal Reserve stressed that it was already planning to buy large quantities of additional debt based on mortgages and is considering whether it would be a good idea to buy long-term US government bonds. The strategy of a central bank buying government bonds mirrors the so-called 'quantitative easing' carried out by the Japanese government when it was fighting deflation in the late 1990s and early 2000s.

Prostitute with rice

The Freakonomics site has a very interesting piece on giffen goods today, where it draws a similarity between prostitutes and rice! They're even running a competition before tomorrow for the best answer to 'what do rice and prostitutes have in common?'

Full article

You can't use that name here, Bud!

Beechwood-aged or not, an EU court decided today that Budweiser-brewer Anheuser-Busch should not have rights to the "Bud" brand throughout the 27 nation bloc. It is a victory for the Czech brewer Budejovicky Budvar, which said it had registered the name in France, Austria and former Czechoslovakia in 1958. Anheuser will now have to rely on registering its trademark in each individual member state. It said it already had trademark protection in 23 of the EU states. Losing the right to a community-wide trademark can be a major blow for a firm, as gaining European Union-wide rights avoids the lengthy and costly process of going through the systems in individual countries and gaining separate trademarks in each of these.

It is the latest stage of a long-running trademark dispute between the two brewers. Budejovicky Budvar was founded in 1895 in Ceske Budejovice, which was known as Budweis by its German-speaking inhabitants. Beer had been brewed there since 1265. Budweiser was first produced in St Louis in 1852 and was America's first national beer brand. The name was taken because it was familiar to the German founders of the company.

With a consumer spending slowdown across the United States and Europe, it is not yet clear whether Anheuser-Busch will appeal today's ruling.

Scudamore dismisses EPL debt fears

Lord David Triesman, chairman of the Football Association, said in October that English soccer was carrying a combined £3 billion of debt. UK Sports minister Andy Burnham called for measures to ensure debt doesn’t endanger the “very existence of one of our great clubs.” However, Richard Scudamore, the English Premier League’s chief executive officer, said today, "Top English soccer clubs have 'manageable' debt because revenue can be maintained even in the financial crisis". He went onto state, "the level of debt is not a huge concern". About half the debt at the twenty Premier League teams was “soft debt” in the form of loans from owners, who don’t expect to recoup the funds, Scudamore said.

Still, the operators of Manchester United and Liverpool took out loans to fund their purchases. The U.S.-based Glazer family has debt of more than £660 million linked to United following its purchase in 2005. George Gillett and Tom Hicks at Liverpool owe around £300 million after buying the Premier League leader last year. Bearing this in mind, it will be intersting to see if these words come back to haunt Scudamore if a leading club falls victim to the credit crunch.

Sterling takes another pounding

The euro hit new highs against sterling today as the two currencies edged closer to parity. The euro hit 90.06 pence sterling this lunchtime, the latest in a series of record highs against the UK pound in recent days. It later fell back to trade at 89.35 pence this evening. Some holidaymakers travelling to Europe from Britain are reportedly already receiving less than one euro for their pound at bureaux de change, where commission is charged. It is thought short-selling - where investors sell assets such as shares or currencies in the hope of buying them back later at a lower price and pocketing the difference - is also behind the pound's slide.

Irish banks to be recapitalised

The Irish Government tonight announced support for a recapitalisation programme of up to €10 billion for credit institutions. The plan would see the Government support recapitalisation alongside private investors and existing shareholders. In a statement issued this evening, it said its objective was to ensure the long-term sustainability of the banking sector in Ireland. Minister for Finance Brian Lenihan confirmed that money from the National Pensions Reserve Fund will be used in the recapitalisation programme. State investment will take the form of preference and/or ordinary shares in the institutions receiving funds.

Mr Lenihan said State investment would be assessed on a case-by-case basis and all the institutions were being asked to submit their proposals by early next month. There is a growing acceptance among some banks of the need to accept fresh capital. Bank of Ireland is believed to have considered at one point holding a rights issue in the New Year, handled by Davy Stockbrokers and UBS in London. AIB is still insisting that it does not require an injection of state capital. As a proportion of its economy and banking sector compared to the UK, the Irish bailout represents a bigger capital injection than theirs.

What is 'Quantitative Easing'?

Most nations are now reducing interest rates at a phenomenal rate to stimulate their economies and counteract a recession they are either in or are sliding towards. But what will happen if/when rates reaches 0%? What will they do then? One option is to actually break through the zero percent barrier and introduce a negative interest rate - which would basically be a tax on bank deposits. Perhaps savers would withdraw their deposits and spend them, however, it is probably more likely savers would withdraw the deposits and hoard their cash at home - thus reducing banks' liquidity. To counteract this, banknotes may even end up having 'best before dates' printed on them after which time they are deemed worthless! Thus forcing people to spend.

A different option which could be used to maintain interest rates at 0% is 'quantitative easing'. It is a monetary policy tool, which means the central bank prints new money, in order to increase the money supply. 'Quantitative' refers to the money supply; 'easing' essentially means increasing. So, the central bank floods the market with cash in an attempt to stimulate an economy in recession and, importantly for 2009, to stave off deflation. The idea is that if the central bank floods enough cash into the market, it will set off the following chain of events:

1. Banks and other financial institutions will build up larger and larger cash reserves.

2. Banks will finally decide to loosen their lending standards to utilize their excess cash.

3. Individuals and companies will start getting the loans they are seeking.

4. The economy will begin to recover as people and companies begin to spend again.

Quantitative easing was used notably by the Bank of Japan to fight domestic deflation in the early 2000s after its property and stock bubble bursts. It was a groundbreaking experiment and took a long time to work because the Bank of Japan was slow to employ all of its policy options and spell out its goals in a credible fashion. In recent weeks, both Ben Bernanke, Chairman, the US Federal Reserve, and British PM, Gordon Brown, have hinted at employing different monetary policies in the near futre for their respective economies. However, it should be noted, despite the almost certainty now that many Western economies will face deflation next year, the inherent danger of flooding the economy with cash can be very high inflation in the longer term. In fact, 95% of all historic cases of hyperinflation begin during either a deflationary depression or deep deflationary recession. (The other 5% is brought about by political stupidity as in Zimbabwe).

Call for new advertising rules in the UK

A leading UK heart charity is today calling for a ban on junk food advertising on television before 9pm, claiming manufacturers are exploiting family shows to bombard children. Adverts for foods high in fat, sugar and salt are banned from the screen during children's programmes. But, in a new report published today, the British Heart Foundation (BHF) says as few as one in 20 shows most watched by children is covered by the ban and that most of children's viewing (68.9 per cent) is outside children's programming and around shows such as The X-Factor, Kids do the Funniest Things and the soap Emmerdale.

The report, prepared by the Food Commission for BHF, also claims advertisers have resorted to pressuring 'bewildered' parents with misleading health claims in the battle for a share of the lucrative breakfast cereal and lunchbox market. Companies use 'sophisticated marketing techniques to manipulate parents into thinking they are buying healthy food for their children', it states. 'It is clear that some food companies are preying on parents' concerns actively to market children's food that is high in sugar, fat and salt,' said BHF chief executive Peter Hollins. 'They are manipulating legislative loopholes to find new tactics to entice children and their parents.

The report highlights several products that, it claims, show how parents are manipulated. These include:

• Kellogg's Coco Pops Cereal and Milk Bars says it is 'the best choice for a lunchbox treat', with images of grapes and wholemeal bread. 'In reality it contains a massive 41g of sugar per 100g and uses adult guideline daily amounts, which could further mislead parents,' says BHF.

• Dairylea says it has 'no artificial colour, flavours or preservatives added'. 'But just one Dairylea Bite contains nearly a third of a child's daily recommended maximum saturated fat intake.'

• A Nestlé and Nesquik magazine ad showing children eating Cheerios and sucking milk through a Nesquik flavoured Magic Straw claims to be 'full of goodness' helping to 'maintain strong healthy bones'. Yet with the mix of Cheerios and strawberry-flavoured milk a child 'would consume 37.4g of sugar,' says the report.

• Burger King Aberdeen Angus Mini-Burgers with Cheese is advertised with a 'warrior' mother saying: 'The lunch battle is over.' Yet there is more than a fifth of a child's daily recommended maximum saturated fat intake in the product.

• KFC Deluxe Boneless Box TV advert shows children who, after a family meal of KFC, volunteer to do the washing-up. This, says the report, uses the 'emotional insight' technique by sympathising with difficulty in getting offspring to do chores. Yet it says there is more than half of a child's daily recommended maximum salt intake in a serving of Popcorn chicken.

Manufacturers denied the findings. A spokesman for Kraft who produce Dairylea cheese said: "Parents tell us that no artificial ingredients are important to them, so that's what we highlight."

"Call to ban junk food ads during 'family' TV", The Observer, 14.12.2008.

Frozen food is cool in everyway

According to this morning's Guardian UK shoppers are cancelling their orders of organic food and are abandoning bottled water in favour of the tap. Premium-label heat-and-eat meals are left on the shelf, along with exotic fruits airlifted in from Africa. There is a new air of austerity in the aisles of supermarkets and a back-to-basics recession diet - which has made frozen food cool again. Until recently many shoppers regarded frozen food as a rather ghastly, downmarket option. Fresh was best, and stores cut back on freezer space to make room for more chilled products. But now frozen food is back in vogue as shoppers search for value and try to cut back on waste. Sales of Sainsbury's frozen peas and roast dinner platters have more than doubled since last year and its frozen garlic bread is ahead nearly 40%. The biggest increase has been sales of frozen raw prawns - up 400% year on year. According to TNS Worldpanel market research, the fastest growing grocers are discounters such as Aldi and Lidl - which devote more space to frozen food than their bigger rivals.

Brian Young of the British Frozen Food Federation puts much of the decline in frozen-food sales down to snobbery - and reckons Marks & Spencer started the rot. "M&S led on chilled food, particularly ready meals, and made great margins. But prices went up because there was so much wastage. The packs were open and visible and people believed it was better. The other supermarkets followed. It was just a form of snobbery, and that is now fading away."

The Tayto man goes abroad

In the Largo Foods HQ, outside Ashbourne, Co Meath, boxes of crisps are waiting for dispatch to places such as Italy and California - all orders received online by Largo, the snack company headed by Ray Coyle which bought the Tayto brand from C&C back in 2006 for €62m. The orders don't have any significant impact on overall sales numbers, but do serve as a reminder that for Largo's business to grow, Mr Coyle and his team have to look outside Ireland, where Tayto's decades-long dominance has been eroded by Pepsico's Walkers crisps and Procter & Gamble's Pringles (although a UK court ruled this year that Pringles are not crisps due to their lower, 42% potato content -- a decision that will save P&G millions of euro a year in tax).

Tayto did not adequately or rapidly respond to the threat from Walkers, which today has a 26% share of the Irish crisp market. The Largo group has a 47% share of the Irish crisp and snack market, with Tayto accounting for 28% of the crisp market, and King 11%. Largo's home-grown brands, including Hunky Dorys, do reasonably well with a 13% share of the crisp market, but it's Tayto that is so far demonstrating it could have the legs to travel much further afield than Europe.

Source: The Irish Independent

Inflation drops sharply

Figures released today show that the annual rate of inflation eased sharply in November to 2.5% from 4% in October. This is the largest reduction since monthly records began. According to the Central Statistics Office, the overall cost of living here fell by almost 1% during November alone. Lower mortgage repayments as well as petrol and diesel price cuts were the main reasons for the reduction. The 2.5% annual rate is the lowest inflation has been for three years. All the signs suggest that further falls are likely in the months ahead. There is likely to be significant downward pressure on inflation coming from the strength of the euro against sterling. Although this means competitive challenges for Irish exporters, it also serves to make imported goods from the UK cheaper for Irish consumers.

A cheesey bailout

While the rest of the world seems to be bailing out banks (and even car companies), Italy is coming to the rescue of parmesan cheese. In an effort to help producers of the cheese, often grated over spaghetti and other pastas, the Italian government is buying 100,000 wheels of Parmigiano Reggiano and donating them to charity. Even though demand for parmigiano is strong in Italy and abroad, producers have found it difficult to make money for years, putting the future of Italy's favourite cheese at risk.

Economists might suggest actually letting a few producers fail, that way supply shrinks, prices rise, and the producers left will become more profitable... or maybe that's too simple a solution.

Effects in the UK of a sinking pound

The pound sterling has plumbed its lowest depths since comparable records began 28 years ago, as investors' exodus from UK financial market intensifies. The Guardian has a good article today on effects of a weak sterling on the UK economy. In particular, it details the consequences for exporters, domestic manufacturing, the tourist industry, the West End, consumers, retailers, and holidays abroad.

Full article

Broadband penetration increases

New figures confirm that more householders now own a home computer and have access to broadband. The latest figures from the Central Statistics Office for the first three months of 2008 reveal that 70% of all households - with at least one member aged between 16 and 74 - have a home computer. This compares to a level of ownership of 55% in 2005. The figures also show that almost nine out of ten of those households have their computer connected to the internet (89%). This compares to 82% in 2005. However, only 43% of all households in 2008 reported a broadband connnection, with 19% reporting having a modem/ISDN connection only. This means broadband penetration among households in Ireland still lags behind the EU 27 average, with more than 70% of households in Norway, Sweden, Denmark and the Netherlands having broadband in 2008. The EU 27 average is 48% at present.

Today's CSO figures also show that almost all businesses with ten or more employees are now connected to the internet - 96% now use the internet. Access to the internet using broadband also rose sharply in 2008, with 83% of enterprises now having a broadband connection. This compares to 68% in 2007 and 61% in 2006. The use of mobile internet connections reached a level of 23% in 2008.

Barbie beats Bratz

Bratz dolls are facing removal from all shops after a US federal court banned parent company MGA Entertainment from making the Barbie rival. The court issued the order after Barbie-maker Mattel won a landmark copyright-infringement case against MGA in August. Bratz designer Carter Bryant has been found guilty of developing the Bratz brand while still working for Mattel. MGA has challenged the ruling, which severely undermines its business model. A federal judge in California banned MGA from selling and making all 40 multi-ethnic dolls in the Bratz line. But it allowed the company to wait until after Christmas to begin removing dolls from the shelves.

Mattel, the world's biggest toymaker, won the case after claiming that Mr Bryant had designed the Bratz dolls while he was still in the employment of Mattel. The toymaker claimed that under the terms of his contract it had ownership of his designs. Mr Bryant worked for Mattel between 1995 and April 1998 and then again from January 1999 to September 2000, and MGA argued that it was between these time frames that Mr Bryant had come up with the designs.

Once the most famous doll, Barbie has ceded ever more popularity to her rival upstarts. Bratz tapped into the lucrative "tween" market - not quite little girl, not yet teen. The dolls' looks were crucial, often coming with lots of makeover accessories. Barbie's worldwide gross sales fell 6% between April and June 2008 as the company's net profit fell 48% to $11.8m. Barbie sales in the US were down 21%.

The Barbie/Bratz showdown isn't just a battle of the dolls - it should act as a strong warning to businesses to develop better systems to manage intellectual property, particularly in the current economic downturn where we are seeing escalating job losses and redundancies.

25 ÷ 5 = 14

Is this the maths behind the bailout of GM, Ford, and Chrysler in the US?

Economics - it's well important, innit?

I thought I'd put this up as I still find it funny. Ali-G's 2006 interview with Charles L. Schultze, United States economist and public policy analyst. He served as Chairman of the United States Council of Economic Advisers during the Carter Administration. Nothing though really prepared him for this.

Jeremeconomics?

Ok, so Jeremy Clarkson isn't really known for his economics insight but following Top Gear's show in Dublin last week, he writes in yesterday's Sunday Times, about our continuing pursuit of the highlife here despite our fall into recession. The article is well written and worth a read.

"I was in Dublin last weekend, and had a very real sense I’d been invited to the last days of the Roman empire. As far as I could work out, everyone had a Rolls-Royce Phantom and a coat made from something that’s now extinct. And then there were the women. Wow. Not that long ago every girl on the Emerald Isle had a face the colour of straw and orange hair. Now it’s the other way around..."

Full Article

This party's over ...

More than one-third of Irish workers will not be having a Christmas party this year, according to a survey conducted by a recruitment website. RecruitIreland.com says 77% of respondents to the survey believe the cancelling of the office Christmas party has a negative impact on staff morale. Only one-fifth of workers will be receiving a bonus this year, compared to nearly half last year.

Today is 'Mega Monday' in the UK

Today is expected to be the busiest online shopping day of the year in the UK, with experts forecasting that spending will reach £320m. The internet retail trade body IMRG said it expected the peak time for shopping to be between 1pm and 2pm, as consumers who had done their research on the high street over the weekend logged on to order their gifts. The payment card issuer Retail Decisions (ReD) has forecast that the busiest minute of the day will be 1.31pm - around the time most people get back to their desks after popping to the sandwich shop. It predicts £980,865 will be spent in what has been dubbed a "mega minute". Last year's busiest minute online was 1:09pm on December 10 when UK shoppers spent an estimated £767,500.

Online sales records are being broken each year as more and more consumers start to feel comfortable shopping over the internet and "etailers" adapt to make the experience more convenient. The impact of the credit crunch has forced many consumers to consider cutting costs, and despite recent high street sales some of the best prices for electrical goods and items like books and CDs can still be found online. David Smith, director of operations at IMRG, said: "The internet has become the best place for shoppers looking to make the most out of their squeezed spending resources and find the best prices and products for presents this Christmas. Online has definitely come of age this Christmas." Smith said that although transactions levels were set to soar there would not be as many sales of big-ticket items as in previous years. "Last year people were still buying the larger electrical items like LCD TVs, but that has really dropped off this year," he said.

Most wanted: current bestsellers on Amazon
DVDs: Mama Mia, The Dark Knight, Wall-E
Video games: Mario Kart with Wii Wheel, Official Wii Wheel, Wii Nunchuk Controller
Books: The Tales of Beedle the Bard, by J. K. Rowling; Dear Fatty by Dawn French; Dreams From My Father: A Story of Race and Inheritance by Barack Obama
Toys: Silverlit PicooZ Helicopter, Original Rubik's Cube, Top Trumps - Top Gear

Source: 'Busiest online shopping day expected', The Guardian, 08 December 2008

Irish pork industry in tatters for Christmas

It is now estimated that Irish pork contaminated with toxic dioxins could have been exported to as many as 25 countries, including France and the Netherlands according to government officials. While the recall of all domestic pork products from shops, restaurants and food processing plants is no doubt a cause of annoyance for consumers, the fallout of this for the Irish pork industry coming up to the lucrative Christmas market cannot be overestimated. The Irish Exporters Association said the total exports of pig meat and related added value products such as pizzas, pies and sandwiches containing pork was about 750 million euros. It said 63% of this went to the UK.

While the sales will eventually pick up again, the timing of this incident could not really have been any worse. The consequences of the recall are likely to be very severe. The recall itself is likely to cost tens of millions of euro but the damage to the pork industry at home and abroad could be even more significant. Within 12 hours of the recall being announced, the story was running on in excess of 400 news websites all over the world, from New Zealand to California.

US jobless queue lengthens

US employers axed 533,000 jobs in November, the biggest monthly cut since 1974, the US Labor Department said. In a dramatic indication of the worsening economic situation, the US jobless rate rose to a 15-year high of 6.7% from 6.5% in October. Since these latest numbers were compiled, further jobs losses have been announced, including big cuts at AT&T. Recent figures have fuelled fears that the world's biggest economy is set for a deep, long downturn. Reacting to the unemployment data, US President-elect Barack Obama said: "There are no quick or easy fixes to this crisis, which has been many years in the making, and it's likely to get worse before it gets better."

Christmas Examination details

Fourth Years:

Thursday 11th December: Elasticity
Friday 12th December: 1 Factor of production & markets chapter OR 1 factor of production & markets chapter
Tuesday 16th December: Producer chapter OR supply chapter
Wednesday 17th December (Double): Short questions (6/9); demand chapter OR consumer chapter.

Fifth Years:
Thursday 11th December: Factor of production OR population and economic development.
Monday 15th December: Market structures OR history of economic thought.
Tuesday 16th December: Short questions (6/9)*
Wednesday 17th December: Demand OR supply
Thursday 18th December: Elasticity OR banking

* The carol service at 10 a.m. on Tuesday, 16th December, means we do not have the double class available to us that morning.

Car sales slump

The number of new cars sold last month was down 55.9% compared to the same month a year ago, according to figures released today by the Society of the Irish Motor Industry (SIMI). Just 644 cars were purchased in November versus 1,416 in the same month in 2007. Sales of imported used cars were down 17.3% in November, compared to the same month a year ago.

The motor industry in Ireland currently employs more than 50,000 people, but SIMI warned today that job losses are likely unless action is taken to stimulate business. Earlier this week the organisation called for the introduction of a scrappage scheme, which it said would boost car sales and lead to the removal of high polluting vehicles from Irish roads. In calling for the scrappage scheme, SIMI is no doubt mindful of the highly successful scrappage scheme in the mid-'90s -- when replacing older cars with cleaner, new ones boosted sales and increased Exchequer revenue. They claim that giving motorists the incentive of trading-in their car of ten years or more against a cleaner, new motor would boost consumer confidence, benefit the industry and increase Government revenue.

Interest rates fall again

The European Central Bank today cut interest rates by 0.75%, its biggest reduction in history. The bigger than expected move comes as euro zone inflation plummets and the euro zone economy sinks deeper into recession. The move takes the ECB's main rate to 2.5%, its lowest in nearly two and a half years, and marks the third cut in barely two months. It is estimated that the latest move, if passed on in full, would knock €128 off the monthly repayments on a 30-year €300,000 mortgage. The ECB has been forced to abandon its gradual monetary policy approach as a wide range of economic indicators in the eurozone are in freefall. The member states of the eurozone are France, Italy, Germany, Belgium, the Irish Republic, the Netherlands, Luxembourg, Spain, Portugal, Slovenia, Malta, Greece, Austria, Finland and Cyprus.

Central banks worldwide are cutting interest rates dramatically to stave off a protracted recession. Earlier, the Bank of England reduced interest rates to 2% from 3%. Sweden's central bank cut its key interest rate by a record 1.75 percentage points to 2% on Thursday and monetary policymakers in Denmark and New Zealand also reduced the cost of borrowing.

Eurozone inflation, meanwhile, plunged to 2.1% in November and is expected to fall dramatically during next year, probably even turning negative (deflation) in some months.

The ISEQ Challenge - November 2008

(Click to enlarge!)

Broadband not as advertised

New research shows broadband subscribers can rarely access the maximum connection speeds advertised by internet service providers. A study on broadband available in Dublin, Cork, Galway and Limerick has found that - on average - consumers benefit from just 60% of advertised speeds.The term 'broadband speeds may vary' - will often be heard in advertisements from internet service providers - but according to new research, those variations can be as much as 60% off the stated maximums!

This report - by the Epitiro internet monitoring firm - finds that fixed line subscribers receive on average 60% of the bandwidth speed being advertised , with mobile users faring slightly better at an average of 64%. Overall, Smart Telecom was deemed to be the best of the providers surveyed, followed by BT Ireland and Digiweb.

In related news, it was reported on Tuesday that contracts will be signed next week on the long-delayed national broadband scheme to provide service to outlying areas, but it will still be another 22 months before the system is operational, the Dáil has been told.

Yet more unemployed

The latest unemployment figures from the Central Statistics Office show another record number of people signing on to the Live Register in November. 16,900 people signed up for unemployment payments or Social Welfare credits last month. This brings the total to 277,200 - the highest level since September 1996. In the year to November, the Live Register saw an unadjusted increase of 106,864 - a jump of 66.1% and the biggest 12-month increase since records began in 1967. The CSO says that the standardised unemployment rate in November rose to 7.8% from a rate of 7.4% in October. This was the highest rate since April 1998.

The latest figures confirm the worsening labour market trend of recent months. Apart from the sharp fall in construction employment, other sectors like manufacturing, retail, transport, and financial services are starting to show significant declines too. Ulster Bank's economist Lynsey Clemenger says that no sector will be immune from job losses, as the economy sinks further into recession next year.

On a technical note, the estimated unemployment rate in November was 7.8%. Note, however, that the Live Register does not measure unemployment, in itself. It includes part-time, seasonal and casual workers who are entitled to benefit. These people are not unemployed as long as they are in the labour force. The Live Register only helps provide an up-to-date guess, working from the official measure of unemployment in the the Quarterly National Household Survey (QNHS). The QNHS showed 143,500 officially unemployed in July against 226,000 on the Live Register at that time.

Ethiopia trades its coffee

Ethiopia, Africa's largest coffee producer, has started trading the crop on a national commodity exchange. In a move aimed at both increasing quality and the amount farmers get paid for their beans, coffee is being traded on the Ethiopian Commodity Exchange. Replacing the previous, more informal, system of sales through middlemen, farmers will now be able to get direct access to current market prices. The exchange has set up a network of warehouses to collect the beans.

Ethiopia is the birthplace of coffee cultivation and the crop continues to account for more than a third of its export earnings. It earned $525m (£354m) from coffee exports in the 2007-08 financial year. However, Ethiopia still remains one of the world's poorest nations, and is ranked 170 out of 177 on the United Nation's Human Development Index.

Irish finances get even worse

The deterioration in our public finances has accelerated sharply according to the latest Exchequer statement from the Department of Finance. According to the figures, there has been a massive shortfall of to €7.9 billion in the the amount of taxes collected by the Government during the first 11 months of the year. This is a far bigger shortfall than was predicted and analysts now expect the tax shortfall for the whole year could well exceed €8 billion. This is an extremely bad set of public finance figures, which point to an Exchequer deficit of about 6.5% for GDP for the year. That is more than twice the European Union borrowing limit. The Government had to borrow €7,360 billion to pay its bills during the first 11 months of the year. That is not far short of €2 billion more than the Department of Finance assumed just two months ago.

This is the equivalent to a tax shortfall for almost €2,000 for every worker in the country and it means that the budgetary arithmetic for 2009 is already under intense pressure before the new year even starts. It is likely to fuel speculation that the Minister for Finance, Brian Lenihan, could be forced to bring in a mini-Budget during 2009 to regain control over the public finances.

(Click to enlarge!)

(Click to enlarge!)

Alcohol freeze

Publicans have announced a one-year freeze in drink prices with immediate effect. The announcement was made by the Vintners Federation of Ireland, which represents about 5,000 publicans outside Dublin, and the Licensed Vintners Association, which represents 700 publicans in Dublin. The two organisations said 2009 is going to be a challenging year for the drinks industry and the move was made to provide value for money to customers at a difficult time. The organisations also called on drinks suppliers and manufacturers to support the move by keeping its sales costs the same too. The LVA and VFI said during the last 10 years the volume of alcohol sold in pubs has dropped from 68% to 32%, while sales from supermarkets and off licences rose. The organisations maintained the initiative for the price freeze came from pub owners themselves, and denied the announcement was a publicity stunt on the same day VAT increases came into effect.

Mankiw examines Keynes

Greg Mankiw is a professor of economics at Harvard. He was an adviser to President Bush and is generally regarded as one of the foremost economists in the world today. In this morning's New York Times he has written an interesting essay on the ideas of economist, John Maynard Keynes (above), and how they might be applicable in the current economic climate.

Full article

ECB to cut interest rate next week?

A steep fall in eurozone inflation and a rise in the jobless rate has raised hopes that the European Central Bank (ECB) will cut rates sharply next Thursday. Analysts said the ECB could now cut rates by up to one percentage point from their current level of 3.25%.