Economic Outlook

An Bord Bia Annual Food and Drinks

Industry DayNovember 05, 2009

Austin Hughes, KBC Bank

It’s Not the Great Depression… But It’s Close

Normal Service Resumed?

OECD Total, Composite Leading indicators, amplitude adjusted

Source: Reuters EcoWin

62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

Indi

cato

r

90.0

92.5

95.0

97.5

100.0

102.5

105.0

107.5

110.0

Wealth Destruction Will Restrain Recovery

United States

House Prices, S&P Case-Shiller, National, SA, Index, 2000Q1=100

Standard & Poors, 500 Composite, Index, Price Return, Close, USD

Source: Reuters EcoWin

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Inde

x

70

80

90

100

110

120

130

140

150

160

170

180

190

200

Inde

x

0

250

500

750

1000

1250

1500

1750

Credit Still Crunched

Ireland, Real Estate and Rental and Leasing, Residential mortgage lending (incl securitised mortgages), EUR [c.o.p 12 months]

Euro Zone, Monetary Financial Institutions, Loans, Households and NPISH, Lending for house purchase, Amount Outstanding, EUR [c.o.p 12 months]

United States, Mortgages, 1-4 mortgage debt outstanding, end of quarter (FOF), USD [c.o.p 12 months]

S ource: Reuters E coW in

00 01 02 03 04 05 06 07 08 09

Perc

ent

-5

0

5

10

15

20

25

30

35

US Economy Is Turning

United States, SA

New Home Sales, Total, AR

House Prices, S&P Case-Shiller, Composite-10, Index, 2000M1=100 [c.o.p 12 months]

S ource: Reuters E coW in

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Num

ber o

f (m

illions

)

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

Perc

ent

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

A Bumpy Road Lies Ahead In Europe

Gross Domestic Product, Constant Prices, SA

Eurostat, Euro Zone, Expenditure Approach, Total at market prices, Chain-linked, Cal Adj, Chg Y/Y

United States, National Income Account, National Product Account, Overall, Total, AR, USD, 2005 prices [c.o.p 4 quarters]

Source: Reuters EcoWin

96 97 98 99 00 01 02 03 04 05 06 07 08 09

Perc

ent

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

Out of Balance

United Kingdom, Constant Prices, SA, Index, 2005=100

Production, Manufacturing

Retail Sales, Predominantly food stores

Retail Sales, Predominantly non-food stores, total

Source: Reuters EcoWin

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Inde

x

50

60

70

80

90

100

110

120

The Other Side Of The Coin

Spot Rates, Close

Euro Zone, EUR/USD United Kingdom, EUR/GBP

Source: Reuters EcoWin

74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

EUR/

USD

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

EUR/

GBP

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

So What About Ireland?

Irish Jobs Market Has Changed Dramatically

Ireland, SA

Unemployment, Rate, Total (Live Register) ILO Employment, Overall, Total

Source: Reuters EcoWin

Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep

98 99 00 01 02 03 04 05 06 07 08 09

Pe

rce

nt

3

4

5

6

7

8

9

10

11

12

13

Pe

rso

n (

mill

ion

s)

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2.2

2.3

Right hand side Left hand side

A Paler Shade Of Grey

Ireland, Unemployment, Overall, Total (Live Register), SA

c.o.p val 1 month

Source: Reuters EcoWin

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Perso

n

-10000

-5000

0

5000

10000

15000

20000

25000

30000

35000

House Prices and Building Still Sliding

Ireland, House Prices, Permanent tsb, National, standardised, EUR [c.o.p 12 months] Housing Starts [ma 12]

Source: Reuters EcoWin

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul

05 06 07 08 09

Per

cent

-15

-10

-5

0

5

10

15

20

10000

20000

30000

40000

50000

60000

70000

80000

Budget Worries Persist

Ireland, Cumulative, EUR

Revenue, Tax revenue [c.o.p 12 months] Expenditure, Voted (Departmental expenditure voted annually by the Dail) [c.o.p 12 months]

Source: Reuters EcoWin

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul

04 05 06 07 08 09

Per

cent

-30

-20

-10

0

10

20

30

40

Irish Consumers Slightly Less Gloomy

Ireland, Index

Retail Sales, All businesses, Linked and Rebased, Current Prices, SA, 2000=100 [c.o.p 12 months] Consumer Surveys, Consumer Sentiment Index (KBC Bank Ireland/ESRI), 1995Q4=100

Sour ce: Reut er s EcoWin

96 97 98 99 00 01 02 03 04 05 06 07 08 09

Per

cent

-40

-30

-20

-10

0

10

20

30

Inde

x

30

40

50

60

70

80

90

100

110

120

130

140

Poorer Sentiment Has Hit Spending

Ireland, Index

Consumer Surveys, Consumer Sentiment Index (KBC Bank Ireland/ESRI), 1995Q4=100

Retail Sales, Food businesses, Constant Prices, SA, 2005=100

Retail Sales, All non-food, Constant Prices, SA, 2005=100

Source: Reuters EcoWin

Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep

05 06 07 08 09

Inde

x

30

40

50

60

70

80

90

100

110

Inde

x

90

95

100

105

110

115

120

125

130

Diagram 4: Turning to the broader Irish economy, how do you feel compared to three months ago?

33%29%

17%

40%

3%

81%

3%

86%

1%

83%

3%

79%

6%

73%

8%

63%

0%

20%

40%

60%

80%

100%

Autumn2009

Summer2009

Spring2009

Winter2008

Autumn2008

Summer2008

Spring2008

Winter2007

Increased

Decreased

Diagram 1: Apart from normal seasonal patterns, how has your company's level of business changed in the past three

months?

22%

49%

16%

59%

9%

69%

12%

66%

16%

59%

22%

45%

29%

40% 41%

23%

0%

10%

20%

30%

40%

50%

60%

70%

Autumn2009

Summer2009

Spring2009

Winter2008

Autumn2008

Summer2008

Spring2008

Winter2007

Increased

Decreased

Diagram 2: Apart from the normal seasonal patterns of the next three months, do you expect your company's level of

business activity to?

27%

35%

21%

45%

17%

59%

13%

62%

18%

52%

30%

38%38%

31%

46%

19%

0%

10%

20%

30%

40%

50%

60%

70%

Autumn2009

Summer2009

Spring2009

Winter2008

Autumn2008

Summer2008

Spring2008

Winter2007

Increase

Decrease

Commodities Still Say The World Is Changing

World, USD

Energy, Oil, Light Crude Spot (WTI), Nymex

Grains, Wheat, Futures 1-Pos, CBOT, Close

Source: Reuters EcoWin

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

USD/

Barre

l

0

25

50

75

100

125

150

USc/

Bush

el

200

300

400

500

600

700

800

900

1000

1100

1200

1300

Where Next For Food Prices?

Consumer Prices, Index

Ireland, By Commodity, Food and Non-alcoholic Beverages, Total, 2006M12=100 [c.o.p 12 months]

Ireland, By Commodity, All Items, Total, 2006M12=100 [c.o.p 12 months]

United Kingdom, By Commodity, Food and non-alcoholic beverages, 2005=100 [c.o.p 12 months]

Eurostat, Euro Zone, Food and Non-alcoholic Beverages, CP011, Food, 2005=100 [c.o.p 12 months]

Source: Reuters EcoWin

97 98 99 00 01 02 03 04 05 06 07 08 09

Perc

ent

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

Summary

The recession is over

The hangover will persist

Recovery will be bumpy

Confidence and costs hold the key