Economic Analysis

The manufacturing PMI stayed in expansion mode, but fell to 51.6 in Aug. The services PMI eased further to 50.6 in Aug with business activity expanded at the slowest pace since Jan’24. The construction PMI fell to 45.9 in Aug, consistent with a fourth straight month of accelerating contraction. Mortgage approvals rose by 3.1% YoY in the 3mths to July. Consumer sentiment improved to 61.1 in Aug, albeit, this remains quite a low level.

Today’s budget, the first of the current Government, contained a package of measures totalling €9.4bn. The Government is providing an additional €8.1bn in spending increases and €1.3bn in tax cuts for next year.

Risk appetite improves following decreased uncertainty on US trade policy as deals concluded with EU, UK, and Japan. Market focus is now on central bank policy, as the Fed pivots to rate cuts. Fed set to cut rates twice more by end-25. ECB cutting cycle has ended. BoE rates trajectory remains uncertain. The dollar is set for weakest year since early 2000s. Euro likely to hold most of its gains, while sterling could remain on the defensive.

The September meeting of the Bank of England’s Monetary Policy Committee (MPC) saw the central bank maintain the Bank Rate at 4.00%. This was very much in line with market expectations. Once again, there was no unanimity within the MPC on its policy decision to hold rates steady.

The September meeting of Federal Reserve Open Market Committee (FOMC) saw the central bank cut interest rates for the first time since December of last year. The target range for the Fed funds rate was lowered to 4.00-4.25%. 

The ECB’s Governing Council meeting for September saw the central bank leave interest rates on hold for a second consecutive occasion. The deposit and refi rates were maintained at 2.00% and 2.15%, respectively. The ‘unchanged rates’ outcome was widely expected by markets. 

As we reach the halfway mark of 2025, the Irish residential property market continues to be defined by a shortfall in supply. The CSO completions data, which is the official measure of new supply indicate, a disappointing performance over the last year from the residential construction perspective.

The global economy entered 2025 in good shape, with indicators pointing to stronger growth in the Eurozone and UK, and continued robust, yet moderating growth in the US. However, the uncertainty created by the imposition of US trade tariffs, followed by partial 90-day delays, has created volatility in financial markets and concern in the real economy.