THE WORST of the recession may be over with the latest official data signalling a slight easing in the pace of economic decline.
Figures released yesterday by the Central Statistics Office (CSO) continue to paint a grim overall picture of the economy, however.
Activity shrank by 11.6 per cent in GNP terms between April and June when compared to the same months of 2008. Construction and consumer spending remain extremely weak on an annual basis.
But the drop in output, while dramatic, was less severe than the 13.1 per cent decline recorded in the first three months of 2009. This has led commentators to suggest, hesitantly, that the bottom of the recession may already have been reached.
The CSO said the economy weakened by 0.5 per cent on a seasonally-adjusted basis between the first two quarters of the year, compared to a fall of 5.6 per cent in the preceding period.
When the profits of multinational companies based in the Republic are included, the economy was stable between the first two quarters and declined by 8.4 per cent annually. Acknowledging that the results are “marginally better” than those recorded in the past few quarters, Michael Connolly of the CSO’s national accounts division pointed out that activity was still only back at levels seen in 2004.
Most economists saw some reason for mild optimism in yesterday’s release. Dermot O’Leary of Goodbody Stockbrokers said it was “highly likely that the worst of the contraction has already passed”, adding that he may look to upgrade his forecasts.
NCB economist Brian Devine, who has already raised his outlook, said he has become more positive since Taoiseach Brian Cowen and Minister for Finance Brian Lenihan stated this week that the consumer would not be hit by tax increases in the budget.
This removes a “structural threat” to recovery, he noted, adding that, while the economy is “climbing out of the depths . . . there is still some way to the summit”.
Responding to the CSO’s release, Mr Lenihan described the figures as “a relative improvement on those recorded in the first quarter”. He also noted that “a consensus appears to have emerged that the pace of deterioration has begun to slow”.
“Through our financial sector policies, the Government is determined to channel credit to the productive sector of the economy in order to support activity and protect jobs,” Mr Lenihan said.
While still negative on an annual basis, exports provided a highlight in the numbers, posting growth of 0.2 per cent quarter-on-quarter.
Consumer expenditure was also slightly positive on a quarterly basis, inching ahead by 0.5 per cent after a drop of almost 10 per cent in the previous year.
Rossa White, economist with Davy, believes consumer spending “has probably found a floor”, even though the actual value of spending could fall further because of discounting.
On an annual basis, personal spending was 6.8 pert cent weaker in volume terms. New housing investment was 56 per cent lower, while imports of aircraft limited declines in overall fixed investment to 24 per cent.
Ronnie O’Toole, chief economist with National Irish Bank, noted that while the economy looks set to technically emerge from recession before the end of 2010, the effects of the downturn are likely to remain in place for some time.
