Irish GDP numbers surprise on the downside

Irish growth figures rarely surprise on the downside but the latest batch of GDP, export and consumer spending numbers from the Central Statistics Office (CSO) for the third quarter, a period that coincided with the reopening of the consumer-facing economy, left analysts scratching their heads.

The figures show the economy grew by a modest 0.9 per cent between July and September, while consumer spending expanded by a meagre 0.5 per cent. Net exports of goods and services, which have increased almost continuously during the pandemic, meanwhile, fell by 4.1 per cent during the quarter as increased imports offset outgoing trade.

A casual observer of the CSO’s most recent national accounts – GDP grew by 6.2 per cent in the second quarter of 2021 and by a record 11 per cent in the third quarter of last year – might think the economy has gone back into lockdown.

Alas statistics is a complex business, and those relating to the Irish economy doubly so. The relatively low headline GDP increase reflected increased royalty payments by multinationals in the information and technology (IT) sector. These are erratic and difficult to predict.

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The latest numbers also reflect increased prices generally, which can reflect multinational headquarters imposing greater costs on their subsidiaries here. However, CSO statistician Christopher Sibley did acknowledge that prices across the economy have risen, a reflection of the current Covid-driven price growth.

He noted, however, that the modest lift in consumption, the main driver of domestic demand, was still above the seasonally-adjusted trend in volume terms.

The figures also need to be seen in the context of the economy having grown in gross domestic product (GDP) terms by 14.5 per cent over the first nine months of the year compared to the same period last year. Spending by consumers was up 4.3 per cent over the same period.

Modified Domestic Demand (MDD), a better measure of underlying activity as it excludes the effects of intellectual property products and leased aircraft, rose by 1.4 per cent during the quarter.

Sibley noted that MDD in the third quarter of 2021 was – at constant prices – €47.7 billion compared to €45.4 in the first quarter of 2020, suggesting a strong domestic recovery.