DAVY REPORT:THE IRISH economy is finally out of recession and returned to growth during the first quarter of the year according to the latest commentary from Davy.

Data on retail sales, industrial production, exports, car sales and surveys of purchasing managers suggest the recession has ended according to Rossa White, chief economist with Davy.

The stockbrokers say the economy grew by 1 per cent in the first three months of the year and predict it will continue to grow at about 1 per cent quarter-on-quarter for the rest of 2010.

Mr White expects gross domestic product (GDP), which takes in the output of all firms in Ireland, to increase by 4.2 per cent next year. The growth will be export driven. As a result gross national product (GNP), which excludes the contribution of foreign owned firms, will contract by 0.6 per cent this year and grow by 2.9 per cent in 2011.

The Davy report suggests that unemployment will peak in the third quarter at about 13.6 per cent, slightly up on the current rate of 13.4 per cent.

“Typically there is a six-month lag in unemployment which is why it doesn’t feel like we are coming out of recession,” said Mr White. “It’s also an export-led recovery, which is about sectors that are capital intensive but not labour intensive.”

The research also shows that Ireland has become more competitive during the recession. The wage gap with other euro zone economies has fallen 5 per cent since the peak in August 2007, while a wider basket of costs has fallen by 6 per cent.

The recovery in employment will be led by the “private services” sector, which will account for 50 per cent of jobs.

This is also reflected in the growth in value of services exports which are about to overtake the value of goods exported from Ireland.

Davy is also predicting a recovery in consumer spending. Mr White said the increase in personal saving in Ireland during the recession was the most dramatic in the euro zone.