In its latest assessment of the economy, it claimed the coming year would bring further increases in average earnings following years of pay restraint, with total wage packets being pushed up on average 0.5pc this year and 1pc in 2015.

But it also warned that while the jobless rate is in decline, long-term unemployment remains “worryingly high”.

The news comes just a day after stockbroker Davy said that a raft of indicators suggest Ireland’s economy is expanding at an “exceptionally rapid pace” and is the fastest growing in Europe.

And a separate survey yesterday showed consumer confidence here has hit a seven-year high.

Investec economist Philip O’Sullivan said the domestic economy has been a particular driver of growth, although exports are still playing an “integral part”.

“The labour market, retail sales and exchequer returns data all reflect the improving health of the domestic economy,” Mr O’Sullivan said.

Comeback

“The economy has added jobs for six successive quarters. The consumer has made a comeback, with retail sales posting eight successive months of annual gains in both volume and value terms – led by ‘big ticket’ items.

“Tax revenues are rising while expenditure, on the whole, is contained, which reduces the quantum of incremental fiscal consolidation needed to achieve deficit targets.”

Investec said there have already been signs of pay increases in some sectors of the economy, pointing out that average economy-wide weekly earnings rose 1.1pc quarter-on-quarter in the first three months of the year to €689.88.

But the bank pointed out that there were wide variances from sector to sector, with seven sectors recording wage growth and six sectors wage decline.

By contrast, surprise figures from the UK now show wages there fell even after employment rose.

UK unemployment fell further in the second quarter and wages declined for the first time since 2009 as the economy continued to create jobs without generating inflationary pressures.

The jobless rate fell to 6.4pc – the lowest since the fourth quarter of 2008 – from 6.5pc in the three months through May, the Office for National Statistics said.

Decline

Wages dropped 0.2pc from a year earlier – the first quarterly decline for more than five years.

Investec said the labour market here continued to exhibit positive signs but said unemployment was still very elevated and the number of long-term unemployed here was worryingly high.

“Some 46.6pc of those on the live register in July of this year had been on it for one year or more,” the commentary said.

“Tackling this issue remains a major priority for policymakers.”

Investec has revised its projection for national house price inflation this year up to 10pc from 6pc, driven by the shortage of supply in Dublin.

Consumer confidence has hit a seven-year high and the bank said the likely less austere Budget in October will pose less of a risk to this.

But it said given the level of indebtedness, it expects deleveraging to continue to act as a headwind for consumer spending for a number of years.

Although general agreement abounds that the recovery is taking hold, there is a wide variance between the various agencies and brokers on the forecast strength of the economy this year, ranging from the IMF and Department of Finance at the most conservative end with their 1.7pc and 2.1pc predictions respectively, to Davy Stockbrokers, which is forecasting 3.5pc growth this year.

Article Source: http://tinyurl.com/kbwqb42