Economic activity picked up substantially in the final months of last year as both consumers and businesses began to place more confidence in the global recovery.
Figures published by the Central Statistics Office (CSO) yesterday show that growth was stronger in the final quarter of 2003 than in the previous nine months of the year.
This saw gross domestic product (GDP) climb by 2.7 per cent in the last three months of the year, while gross national product (GNP) rose by 5.5 per cent.
The late surge helped to lift average annual growth in GNP to 3.3 per cent, although GDP for the whole year was much more sluggish at 1.4 per cent. This was the lowest GDP growth to be recorded since 1986, with the weakness largely attributed to a fall-off in the profits of multinational companies operating in the Republic.
A key difference between the two measures of economic growth is that GNP excludes the profits of foreign-owned businesses. Some economists argue that this makes GNP a better measure of the economy's performance on the ground.
The gap between GDP and GNP last year effectively reverses a trend seen in 2002, when GNP came in at just 0.1 per cent and GDP growth was 6.9 per cent.
A breakdown of the 2003 figures shows that while personal spending was weak for most of the year, it posted improved annual growth of 2.4 per cent in the last quarter.
Personal consumption for 2003 as a whole remained disappointing even with this late fillip however, with growth settling at just 1.9 per cent.
Investment spending - or capital investment - followed a similar pattern last year, with growth rather anaemic in the first three quarters before gaining strength as the year drew to a close.
The CSO said capital investment had declined by 2.9 per cent for the year as a whole, despite rising by 12.8 per cent in the fourth quarter.
Within this, housing was again the main buoy behind annual growth, with new housing volumes up 19 per cent year-on-year while building activity as a whole rose by just 3 per cent.
Exports and imports were both down by close to 6 per cent over the year, again despite a positive trend at the end. The CSO acknowledged that part of the apparent weakness was attributable to a UK VAT fraud that inflated trade numbers in 2002.
Most commentators were last night taking some comfort from signs of a pick-up at the end of 2003, however, predicting this should be maintained into 2004.
The trend will doubtless be high in the minds of the social partners as they begin pay talks on the second 18 months of the Sustaining Progress national agreement. Mr Manus O'Riordan, chief economist with the State's largest union SIPTU, yesterday hit out at what he referred to as the "spin" placed on the Economic and Social Research Institute's (ESRI) latest report on the economy, which delivered an upbeat assessment. Mr O'Riordan said undue emphasis had been placed on the ESRI's warning that wage growth should be limited to about 3 per cent. He said the "real facts" in the ESRI commentary pointed to strong growth and declining inflation.
IIB chief economist Mr Austin Hughes yesterday described last year's growth figures as "solid", but he warned against expectations that the economy would post a significantly better performance in 2004.
Economists at Davy Stockbrokers were meanwhile sticking with earlier forecasts for GNP growth of 3.8 per cent. They said yesterday's figures confirmed that a recovery was taking hold. Dr Dan McLaughlin at Bank of Ireland Global Markets was more optimistic, forecasting growth of 4.5 per cent in GNP and GDP.
