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| Stock markets rose yesterday (February 2nd) ahead of today's purchasing managers indices (PMIs) for the global services sector. Also, following better-than-expected US initial jobless claims and another positive ADP employment survey, the market now expects that US non-farm payrolls will have increased by 140,000 in January when the official data are released today. |
| This morning, the revised services PMI surveys for Germany, France and the euro area are published. In January, the rise in the preliminary release of the euro area service sector PMI provided a positive surprise to markets. Services sector PMI surveys for January are released for the first time today for Italy, the UK and the US later this morning. Together with the non-farm payrolls number, the services sector PMIs have the potential to materially bolster market sentiment. |
| The Irish services PMI released early this morning showed a marginal fall to 48.3 in January, down from 48.4 in December. While below the 50 no change level, the correlation between the Irish PMI data and official GDP statistics is very poor. So we cannot infer too much about the pace of expansion in Irish GDP from the PMI surveys. |
| Yesterday's Exchequer Returns indicated 17% growth in tax revenues on January 2011. However, the annual comparison is distorted by timing effects, including the late receipt of €261m of corporation taxes that had been received too late last year to be included into the end-of-year accounts. |
| The most striking feature of yesterday's January Exchequer Returns was the strength of value added tax receipts (VAT), up 3% on the year. The VAT receipts in January predominantly relate to sales in November and December. So the 3.0% growth in VAT receipts add to evidence from the retail sales data that Irish consumer spending may have bounced back in the final quarter of 2011. |
| That said, consumers may have brought forward spending to avoid the increase in the top rate of VAT to 23% in January. In addition, the annual comparison is flattered by the poor weather in December 2010 which temporarily depressed consumer spending. Excluding the volatile motor trades sector, retail sales fell by 1.2% in December 2010 before expanding sharply by 1.4% in January 2011 as shoppers returned to the high street. So for now we cannot draw any concrete conclusions on the pace of tax revenue growth in 2012 from the Exchequer Returns. |