Good morning,

 

Here in Ireland, we’re acutely aware of the impact of multinational firms on the economy, particularly those in the Tech and Pharma sectors. The influence on economic data led the Central Statistics Office (CSO) to state a preference for what is known as GNI over GDP for some national statistics. However, this doesn’t always follow through to a eurozone level and Ireland continues to have an outsized impact on certain statistics. Indeed, 12 months ago Ireland’s 12.2% GDP growth figure for 2022 meant that the entire eurozone avoided a recession. The episode led to many raised eyebrows throughout the economic community.

 

A similar scenario occurred last week when eurozone Industrial Production rose 2.6% for the month of December vs a consensus forecast of a -0.8% fall. Therefore, the economy is stronger than expected, inflationary pressures will persist, and rate rises move further into the distance – right? Perhaps not.

 

Predominately led by the transfer pricing policies of multinationals, Ireland’s individual figure was up 23.5% for the month, enough to drag the single currency bloc figure well into positive territory. There’s nothing new in the above, and the narrative regarding Irish data is well established. However, as top-down active investment managers we’re always trying to delve a little deeper, to understand the real workings of where we are in the economic cycle – which ultimately informs our asset allocation decisions. You can learn more about Zurich’s top-down active investment process and meet the team at Zurich Investments in our new brochure; Investing Better Together.

 

As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.