The mysteries of measuring the Irish economy

It looks like the euro zone economy did not grow in the final quarter of last year at all. A fortnight ago Eurostat, the EU statistics agency, estimated that the euro zone expanded by 0.1 per cent quarter on quarter, just avoiding a slip into recession. But this was based in part on estimates from the Irish Central Statistics Office (CSO) that Irish GDP expanded by 3.5 per cent in the last three months of the year, which has now been revised down to 0.3 per cent growth. Such is the size of multinational-dominated Irish GDP that the original estimate had kept the entire euro zone in positive territory.

But now the final figure for the euro zone may be zero, or even negative, depending on revisions elsewhere. Either way, the CSO will have to rethink its way of producing an early flash GDP estimate, given the extent of the revision. Its new “frontiers” policy of using new sources and making data available as early as possible is really useful, but the complications of Irish GDP have clearly intervened to upset things in this case.

[ Irish economic growth revised downwards in the fourth quarter ]

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Overall, the figures show that the Irish economy held up reasonably well. The measure of modified domestic demand – which tries to factor out multinational distortions – was pulled down for the second quarter in a row, this time by falling investment. Technically, the domestic economy was in recession. But the key metric of consumer spending rose by 1.1 per cent in the quarter – after adjusting for inflation – which is encouraging, given the pressure of the cost-of-living crisis. It was 3.5 per cent ahead on a year earlier.

As ever, it is difficult to get a grip on the figures, influenced as they are by multinational trends. GDP, the main international indicator, rose by 12 per cent – driven in part by multinational distortions. But even modified domestic demand, which fell in the final two quarters, was up 8.2 per cent for the whole year. The Covid-bounceback was a factor here earlier in the year. In the second half of 2022, the multinational sector continued to do well, despite wobbles in tech, while the domestic economy more or less stalled.