During last winter our economy started to recover its momentum. After making due allowance for seasonal trends, our GNP (which is the best measure of economic performance) rose by 3.25 per cent during that six-month period - a remarkable annualised growth rate of 6.5 per cent, writes Garret FitzGerald
Moreover, seasonally-adjusted employment increased by 37,000 in the six months ended February last. Finally, although much of the tax revenue increase of the first half of this year was due to payments by tax defaulters as well as other non-recurrent factors, the underlying trend of the Exchequer returns offers confirmation of this cheerful picture.
What is remarkable about this recovery is that, at least up to last Easter, it seems to have owed little or nothing to external demand which, through its impact on the activities of the industrial sector, and especially high-tech, foreign-owned firms, has in the past been the prime motor of our economic success.
In the first five months of this year manufacturing output actually fell slightly, and the value of exports has been very little greater than in the last quarter of 2003, when increased externally-remitted profits rather than higher output accounted for most of an apparent increase in the value of manufacturing output.
Manufacturing employment also has been continuing to drop below the previous year's level at a rate of about 8,000 a year, with the result that it is now 21,000 lower than it was in the spring of 2001. But although there has as yet been no sign of any overall recovery in external demand for Irish manufactures, IDA announcements of new industrial investments have offered hope of a fresh impetus to our foreign-owned, high-tech sector in the future. The ESRI has recently reinforced this optimism, stating that recent industrial surveys have pointed to a strong industrial recovery in the latter part of the year.
If this proves correct, then, coming on top of the recent rapid expansion of construction and service sectors, we could see a very high national growth rate indeed within six months.
By contrast with the manufacturing sector, some services have been experiencing high growth, in particular, finance and insurance, the health service, and "other services". This latter rather amorphous sector has experienced a remarkable 10 per cent increase in employment during the past winter.
Whence did this growth impetus come? Personal consumption last winter was running only 2 per cent higher than a year earlier, and did not start to accelerate until March this year.
Moreover, during those six months there was less stock-building. The source of the great bulk of the increased demand during this recent period was in fact investment - much of it in the construction sector. Last year, house-building peaked at almost 70,000 units, which is not far off half of the British figure - although Britain has 15 times our population. In other words, per head of population, we have been building well over six times as many dwellings as Britain - and four or five times as many as in continental countries!
This has led to a continuing expansion of our construction labour force, which, after another 7 per cent increase in the past 12 months, is now double the size it was seven years ago.
Whilst there has certainly been a recent recovery in other forms of construction, these employment data suggest that house-building, which had been expected to taper off this year, may still be continuing to expand.
No-one foresaw the scale of the housing boom of recent years. On the eve of the Celtic Tiger a decade ago, we were building about 20,000 dwellings a year.
While that was clearly inadequate for our needs, the idea that within 10 years we would be building 3½ times as many dwellings would have been dismissed as absurd by any informed observer of the Irish scene a decade ago. Part of this house-building has been due to the growth of construction of holiday homes, especially in the west, but a major factor has also been the huge acceleration in the rate of increase of our population in recent years.
In the early 1990s, our population was rising by about 15,000 a year, but within the past four years this rate of increase has multiplied four-fold - to an average of 60,000 a year. By the end of last year, this had brought our population above the four million level for the first time since 1872.
On the face of it, this faster population growth may appear to have owed something to a higher birth rate, but when allowance is made for births to non-resident, non-national mothers who visit Ireland for this purpose and leave again with their babies, the birth rate increase may not in fact have been a significant factor in population growth.
By far the most important factor has in fact been the supplementation of our labour force by immigrant workers.
When allowance is made for the outward migration of the babies born here to visiting mothers, immigration during the past four years must have been running at an average of around 35,000 a year - peaking in 2001 at over 40,000, and falling back last year to just under 30,000. These immigrant workers have, of course, included returning Irish emigrants, but almost half of them have been people from other lands. We have needed these to supplement the insufficient numbers of our own people whom we have been able to educate and train in our universities and institutes of technology to meet our skilled employment needs.
During the 1990s immigrants seem to have provided about one-quarter of all our requirements for employment entrants with higher education, so they have been making a huge contribution to our economic growth.
But immigrants, whether returning Irish or non-nationals, have to be housed, and their arrival in greatly increased numbers has made a major impact on our housing market, in terms both of demand for dwellings and of pressure on house prices.
To this extent, house price inflation can be seen as part of the cost of economic growth - a growth that has recently raised Irish output per head to a level slightly above the average of the old 15-member EU, and well above that of the recently-enlarged Union of 25.