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Despite Brexit concerns, domestic economy doing well – SME Market Monitor

Despite Brexit concerns, domestic economy doing well – SME Market Monitor

The domestic economy is performing strongly despite a dip in consumer sentiment, according to the latest SME Market Monitor from the Banking and Payments Federation Ireland.

The BPFI said that businesses here have been boosted by improving employment, as well as a 2.1% rise in retail sales during April.

That is despite consumer sentiment falling in the first five months of the year as fears around Brexit weigh on the public.

The monitor, prepared by EY-DKM Economic Advisory Services, tracks trends across 15 different indicators which are important for the performance of the SME sector.

It reveals that despite Brexit uncertainty, Irish households continued to loosen the purse strings and retail sales reached a record high in April, increasing by 2.1% on the month.

The first quarter of the year also saw significant improvement in labour market indicators.

Annual employment growth accelerated to 3.7% in the first three months of the year – the largest increase since the third quarter of 2007 – while and unemployment fell to of 4.6% in April.

The monitor also noted that Brexit preparations boosted activity across the manufacturing sector, but the sector continues to lose momentum.

It also said that consumer sentiment decreased from 98.8 in January to 89.9 in May.

Annette Hughes, Director of EY-DKM Economic Advisory, said there is a significant mismatch evident between weaker consumer sentiment on one hand – driven in part by ongoing Brexit uncertainty – and the buoyant labour market and strong household spending on the other.

“For many, Brexit remains firmly in the background , despite the positive economic news at home. Until such a time as there is a clear outcome for Brexit, this ambiguity is likely to continue to weigh on consumer and business sentiment,” Ms Hughes said.

She said that while Brexit brings potentially severe implications for consumers and businesses here alike and is weighing on sentiment, current indicators point to a more positive story in the domestic economy.

“The labour market continues to outperform expectations – driving strong growth in consumer spending, a key indicator for SMEs,” Ms Hughes said.

“New SME lending in Q4 2018, although down 5.6% on the corresponding figure last year, was up strongly in year-on-year terms in the preceding four quarters, especially in the property and agri-food sectors,” she added.

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