Week Ahead (3 August)

Tuesday, 3 August - Central Bank of Ireland to release statistics on gross national debt

The Central Bank of Ireland will release statistics on Ireland's gross national debt today. The statistics will be interesting in the context of the summer economic statement (SES) issued by the Minister for Finance, Pascal Donohoe, published on 14 July, in which the department forecast better economic growth, more borrowing and spending, and a higher deficit over the coming years. The SES showed that non-Covid related spending is expected to reach €80.1 billion next 2022, an increase of 5.5% compared to 2021. It also revealed that the government is planning to borrow an extra €18.8 billion over the next five years to invest in building housing.

Separately, the Governor of the Central Bank, Gabriel Makhlouf, last week played down suggestions that the proposed 15% minimum global corporation tax would have a deleterious effect on the Irish economy. Makhlouf said that while the 15% rate would have "some" impact, he was not worried about an oversized effect on the economy.

Wednesday, 4 August - AIB Services PMI for July to be released

The latest AIB Ireland Services PMI will be released on Wednesday, showing the performance of the services sector in July. The index reached 63.1 in June, up from 62.1 in May. Total activity increased at its fastest rate since January 2016, while employment rose at its quickest pace since September 2017. Over the second quarter of 2021, the index averaged 61.0, compared to 44.0 for the first quarter, which was caused by Ireland’s strict lockdown. However, the month-on-month rise in June was the smallest in the current growth sequence.

The rise in June was caused by the release of pent-up demand following the easing of more restrictions in Ireland.

Thursday, 5 August - Bank of England Monetary Policy Committee to meet

The Bank of England's Monetary Policy Committee will meet on Thursday.  On the agenda will be the growing inflation rate, which reached 2.5% in July, its highest level since August 2018.  The faster than anticipated growth in inflation has prompted several members of the committee to consider publicly whether the BoE's bond-buying programme, worth £895 billion, should be wound down, although opinions vary around the correct approach to the issue across the eight-member committee. 

On 14 July Deputy Governor of the BoE, Dave Ramsden, said that consideration might be given to tightening monetary policy sooner than had been anticipated, given the strong bounce-back of economic activity since the reopening of the UK economy and the current inflation situation.  Fellow committee member Michael Saunders spoke in stronger terms the following day, saying that using the £895 billion programme to its fullest extent would risk high inflation rates for a longer period. 

However, on 19 July, Professor Jonathan Haskel said that cutting off the bond-buying programme too quickly could lead to economic stagnation. He was backed by Catherine Mann, who will join the Monetary Policy Committee in September, who stated that the recent spike in inflation was likely to be temporary.  These divisions among the MPC members will make the job of market participants more difficult in the coming months.