CSO figures show continuing economic decline

THE DOMESTIC Irish economy recorded across-the-board annual declines in the third quarter of this year, with gross national product (GNP) falling by almost 5 per cent, or by 0.9 per cent on a seasonally adjusted basis.

Capital investment fell back by 14.7 per cent, investment in building and construction dropped by 18.4 per cent and the construction of new houses plunged by 33 per cent.

The latest statistics from the Central Statistics Office (CSO) provide further evidence that the Irish economy is in trouble, with economic output declining for the second quarter in a row - the official definition of a recession.

In the first nine months of the year, GNP declined by 2 per cent to stand at € 116.1 billion. Pat McArdle, chief economist with Ulster Bank, is now predicting a 3 per cent fall in GNP for 2008, while Dermot O'Leary, chief economist with Goodbody Stockbrokers, estimates a full-year contraction of more than 4 per cent.

Describing the latest decline as "disastrous", Alan McQuaid, chief economist with Bloxham Stockbrokers, said that early indicators are already pointing to an even greater contraction in the fourth quarter.

The picture looks a little brighter when multinational companies are factored in, as they continue to prop up gross domestic product (GDP), which was marginally higher than the third quarter (Q3) of 2007 at 0.1 per cent, and 1.2 per cent on a seasonally adjusted basis, although in the first nine months of the year it fell back 0.6 per cent. However, outflows soared to € 8.3 billion in the third quarter - the highest on record, and an increase of almost €2 billion on the same period in 2007 - acting as a drag on GNP.

Across the indigenous economy, the majority of indicators were weak. Consumer spending continues to decline, and was 1.3 per cent lower than the same period of the previous year, with the sale of new cars plunging by 16 per cent. Although spending on goods was down approximately 5 per cent in the year, one of the few bright spots during Q3 was spending on services, which advanced by 2 per cent. However, much of this spending took place abroad, as Irish consumers splurged on foreign holidays.

Capital investment is now back at 2004 levels, declining by 14.7 per cent in the third quarter to €9.5 billion, as construction continues its downward trend. Investment in building and construction recorded an 18.4 per cent reduction - the greatest quarterly decline in the series - and new housing fell off by 33 per cent.

Overall, exports were up by 0.6 per cent in the year to September, again boosted by multinationals.