Ibec has this week forecast growth of 5.6% this year and a buoyant consumer economy growing by 2.6% in volume terms. In its latest Quarterly Economic Outlook for the first quarter, Ibec say all indicators now point to growth clearly benefitting households through improving wages and incomes.
In the labour market, Ibec predict 2018 will see employment reach record levels with over 2.2 million people at work and the economy approaching full employment. In addition, Irish workers are experiencing the quickest real wage growth in Europe. As a result, total household purchasing power, excluding borrowing, has never been greater in the history of the State.
However, Ibec has also warned that threats to Ireland's competitiveness are resurfacing. The report claims demand has recovered but many domestic business costs are also surging. According to Ibec, the major question facing the economy over the coming years will continue to be Ireland's ability to sustain economic growth without experiencing significant competitiveness erosion.
As the economy reaches capacity, Ibec stresses that more co-ordinated action will be needed to make sure Ireland does not repeat the mistakes of the past.
Speaking this week, Ibec's Head of Tax and Fiscal Policy, Gerard Brady said, "There is a particular threat from rising costs for our indigenous sectors which are already dealing with the uncertainty of Brexit. It is worth remembering that during a period of rapid global growth during the 2000s, the exports of our indigenous sectors grew at a quarter the pace, and were a quarter as responsive to global growth, as they have been since 2010. That improvement in competitiveness was hard won."
He added, "Our analysis today shows, however, that the price of Irish food exports going abroad has been badly affected by the sterling exchange rate shock and is back to levels last witnessed in 2009. Feedback from members suggests this price pressure is being absorbed largely by margin erosion. That cannot last indefinitely."