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Roundup-Irish consumers recovering

Thursday, July 05 08:21:28

The services sector shrank for the second month in a row as new business showed only a marginal rise in June. The NCB Services Purchasing Managers' Index, which measures the health of the industry, declined slightly, falling to 49.7, just below the 50 mark that separates expansion from contraction. The survey showed new business, which registered 50.3 on the index, was driven by a strong increase in new export orders to 54.2. Employment also continued its downward trend, falling to 49.2 as both financial services and transport and leisure showed declines in staffing.

Although confidence fell over the month, companies said they were confident that activity would be higher than current levels in 12 months' time. Input costs continued to rise, putting pressure on firms as they once again cut output prices due to competition and in an attempt to stimulate demand. Output prices have now decreased in each of the past 47 months. Consumer confidence, however, showed a small increase according to the KBC Bank Ireland/ESRI consumer sentiment index, which increased to 62.3 in June from 61.0 in May, bringing it very close to the six-month high of 62.5 recorded in April.

"The latest consumer sentiment index reveals a slight increase in June, with most of the previous month's decline having been reversed. Despite some recent hesitation, the broader trend reveals a gradual recovery in sentiment since the end of last year," according to Eddie Casey of the ESRI. Austin Hughes of KBC Bank Ireland put the improvement down to "a divergence between the greater concern expressed about the broad economic outlook and a little less pessimism in relation to households' own financial situations. This may reflect a 'silver lining' in terms of lower oil prices and a possible drop in borrowing costs that accompanied darker euro zone clouds." He cautioned that "the improvement in sentiment in June largely reflects a drop in negative responses rather than any marked increase in positive replies. So, there is no sense Irish consumers expect any dramatic improvement in their circumstances that would prompt much stronger spending". The Irish Times

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Members of the Quinn family cannot be trusted to abide by court orders, the Irish Bank Resolution Corporation (IBRC) said yesterday, as it revealed it was seeking the urgent appointment of receivers to the worldwide assets of family members. The bank cited the recent finding of contempt of court orders by Ms Justice Elizabeth Dunne against Sean Quinn snr, his son Sean and his nephew Peter Darragh Quinn, and material that emerged in that case.

It was also very concerned about a recently published video recording of a January 2012 meeting in Kiev, Ukraine, showing Peter Quinn and Sean Quinn jnr discussing movement of money and showing Peter Quinn was "prepared to lie" to the High Court. In an affidavit, Richard Woodhouse of IBRC, formerly Anglo Irish Bank, said the recording published last weekend in the Irish Mail on Sunday appeared to refer to attempts being made, "and which continue to be made", to strip assets from a company holding a valuable asset, a shopping centre in Kiev, Ukraine, he said.

The video showed an exchange regarding large sums of money, he said. It also showed Peter Quinn stating he was in breach of a court injunction and, when asked would he lie in his testimony, laughing and responding: "I'd have to lie . . . that wouldn't overly worry me." The footage also showed a discussion regarding Peter Quinn and Sean Quinn jnr's desire to find a way to move $100,000 (E79,775) in cash from Kiev to an account in a safe place and a discussion about the logistics of transporting that sum in a way that is not detected, Mr Woodhouse said. There were also references to "six million" and "five million" and a detailed discussion about the need for Peter Quinn to lie about signing contracts or he would go to jail, Mr Woodhouse added. The Irish Times

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Mortgage lender AIB has outlined new solutions for helping struggling homeowners faced with mounting arrears and repayment difficulty. In an email to staff, AIB set out details of how mortgage holders in difficulty will be identified and provided with new longer-term solutions and the implementation approach being undertaken. During July and August of this year, the bank's Arrears Support Unit will identify customers in difficulty from two groupings: customers who have identified themselves as pre-arrears or are already in early arrears, and customers who are in serious arrears.

A suitable short or long-term forbearance solution will then be selected for the customer, based on the customer's repayment capacity. The solutions include a split mortgage, a negative equity trade down (where a customer trades down to a property more appropriate to his/her current financial circumstances), voluntary sale of the property or short-term forbearance. The short-term forbearance solution could be an interest only repayment, a fixed repayment, a repayment break, an extension of the loan term, capitalisation of arrears or a deferred interest scheme, and is mainly for customers in temporary difficulty. The Irish Times

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Irish owners of holiday homes in France are to be hit with punitive tax rises under plans announced by the new Socialist government. Those owning second homes in areas such as the Dordogne and other parts of France, particularly those serviced by budget airlines will be hit as President Francois Hollande seeks to tax the better-off to reduce France's large budget deficit.

On Wednesday, the French government announced it was to increase taxes on foreign-owned second homes. Tax on rental income would rise from 20 per cent to 35.5 per cent, and capital gains tax on property sales would rise from 19 per cent to 34.5 per cent. The extra in each case is being labelled a "social charge". The rise in tax on rental income will be retrospective, from Jan 1 this year. The increase in capital gains tax applies from the end of this month, meaning property owners will have little time to escape the increased tax by selling their homes.

Holiday home owners already pay two other taxes to the French government: the taxe fonciere, which is paid by the house owner and the taxe d'habitation, which is paid by those who live in it. The tax rises are part of a wider package of increases that are intended to raise E7.2 billion to meet a budget deficit target of 4.5 per cent after the government of Nicolas Sarkozy left the French exchequer with an expenditure black hole. The Irish Independent

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Ireland's borrowing costs remained below those of Spain yesterday, as both Dublin and Madrid prepare to face the bond markets today. Market prices showed investors willing to lend to Ireland for 9 years at just under 6pc, while the rate for Spain was 6.3pc, and 5.75pc for Italy.

Positive reaction to last week's EU summit -- especially the changes to bank rescues -- has seen the yield on 9-year Irish government loans fall below 6pc for the first time since late 2010. At the depth of the eurozone crisis this time last year, yields hit 15pc. They had settled just below 7pc before last week's EU deal. Analysts say the present premium over Spain may not last. Traders were caught out by the scale of the banking agreement and the switch towards Irish bonds may have been overdone. While too much should not be made of the yield figures, with the Government not borrowing on the market, the chances of it being able to return to commercial borrowing later this year had improved, they said.

Sentiment will also be helped by an expected quarter point cut in interest rates from the European Central Bank today. A further cut, bringing the official rate to 0.75pc, is expected, partly as a result of the summit agreement. With half of all Irish mortgages 'tracking' the ECB rate, any cut brings an immediate benefit to disposable incomes, as well as other benefits to the economy. Today, the National Treasury Management Agency (NTMA) dips its toe in the market for the first time since the 2010 bailout; borrowing E500 million to be repaid in October. The Irish Independent