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WRAPUP 1-Irish indicators cheer; too early for confidence

Published 05/01/2009, 09:49 AM
Updated 05/01/2009, 09:56 AM
KBC
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* April manufacturing PMI and consumer sentiment rise

* Feb retail sales up from Jan, down sharply vs year ago

By Padraic Halpin

DUBLIN, May 1 (Reuters) - Ireland enjoyed some rare positive economic data on Friday when consumer sentiment, manufacturing and some retail indicators improved but experts agreed it was too early to see "green shoots" in the economy.

Consumer sentiment rose in April but remained close to record lows, while the volume of February's retail sales was also up month-on-month but down almost 21 percent compared with a year ago.

Separate purchasing managers' index data showed Irish manufacturing shrank at a slower pace last month and there were signs the sector's 17-month long decline may be past its worst point.

However, with unemployment still on the rise consumer demand was seen remaining weak in the coming months.

"It's difficult to see where consumers are going to get the impetus to begin spending in any real way when the jobs crisis is very much in full steam," said Dermot O'Leary, chief economist at Goodbody Stockbrokers.

Another 16,000 joined the jobless queues in April and although there were fewer layoffs than in previous months, the government-funded ESRI think-tank predicted unemployment would rise to 16.8 percent in 2010.

O'Leary said there was more room for optimism on the manufacturing side.

"The main source of optimism on that front would be that the export data for Ireland has been relatively positive," he said. "We've seen collapses across the world but Ireland is situated in sectors which are less sensitive to these kind of cycles."

Trade figures earlier this week showed a 6 percent month-on-month rise in exports in February had increased Ireland's trade surplus to 3.7 billion euros ($4.92 billion).

ECONOMIC RESPITE

Irish manufacturing activity -- as measured by the NCB Purchasing Managers' Index (PMI) rose to 36.1 last month from 35.1 in March, offering a sign of some minor economic respite.

The headline index rose for the second month running and the fact that inventories were being depleted faster than new orders receded was also pointing towards a less negative trend, said Brian Devine, economist at NCB Stockbrokers.

"As in other parts of the world, the Irish manufacturing PMI was up for a second month running and it is quite possible that it has bottomed out," Devine said.

The April PMI figure did mark the third-fastest contraction in the 11-year history of the survey and was still well below the 50.0 mark separating growth from contraction.

Likewise the KBC Ireland/ESRI Consumer Sentiment Index rose to 46.8 in April from 44.1 in March but remained close to an all-time low of 39.6 reached in July 2008.

"The April sentiment reading points towards a greater measure of resilience among Irish consumers than might have been expected," said KBC Ireland Chief Economist Austin Hughes.

"This isn't to suggest a turning point is close at hand but it may argue against a completely fatalistic view of Irish economic prospects," Hughes added.

The volume of Ireland's retail sales rose 5.7 percent in February from the previous month and fell 20.9 percent from a year ago but much of the drop was due to a slide in motor sales, which were 53.2 percent down in February from a year ago.

Excluding motor sales, retail sales volume would have fallen by just 6.9 percent year-on-year and would have risen 1.3 percent month-on-month.

(Editing by Stephen Nisbet)

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