Strong exports drove growth of 2.5% in second quarter, says CSO

The Irish economy grew 2.5 per cent in the second quarter of this year, five times the euro zone average, on the back of another strong pick-up in exports.

This follows a 0.4 per cent contraction in the first quarter and signals that the economy is likely to grow by about 7 per cent this year.

However, experts cautioned about reading too much into the headline numbers in the latest quarterly national accounts, noting they were heavily distorted by the activities of multinationals.

The figures showed output from the State’s dominant ICT sector grew in volume terms by nearly 12 per cent in the three-month period, and is now up over 37 per cent year-on-year.

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The global clampdown on multinational tax avoidance has precipitated a massive transfer of assets to Ireland, and the jump in ICT output reflects the greater concentration of activity here.

The latest numbers also painted a rosy picture of the domestic economy, with personal consumption of goods and services, a key barometer of economic activity, rising by 1.5 per cent in the quarter. It was also up by 4 per cent on an annual basis, one of the sharpest annual growth rates recorded since the crash.

“The improvement in the consumer spending numbers is more consistent with the reality of employment growth of 3.5 per cent,” KBC Bank’s chief economist Austin Hughes said.

He said the latest numbers fitted with the notion that recovery was broadening and strengthening generally.

Industrial output increased by 5.3 per cent in volume terms, while the more domestically-focused distribution, transport, hotel and restaurant sectors grew 3.9 per cent. As the State grapples with the ongoing housing crisis, construction output grew by 3.2 per cent in the quarter and by 11.5 per cent annually.

In contrast, investment fell by 1.4 per cent due to a fall-off in spending on machinery and equipment and intellectual property.

On the trade side, exports of goods and services rose by nearly 6 per cent, while imports fell by 0.3 per cent.

Surplus

The State’s balance of payments current account, a measure of transactions with the rest of the world, showed a surplus of over €10 billion in the second quarter.

Minister for Finance Paschal Donohoe described the figures as very strong.

“While the headline GDP figures can overstate activity in the Irish economy, domestic measures such as modified domestic demand clearly indicate that the economy continues to perform strongly.

“The strength of the domestic economy is also reflected in full-time employment growth of over 4 per cent as well as tax receipts to end-August, which increased by over 5 per cent compared to the same period last year,” he said.

“While the economic situation remains favourable at present we must remain vigilant. The Irish economy faces a number of significant risks including the potential fallout from Brexit, increasing trade protectionism and potential overheating as the economy approaches full employment,” said Mr Donohoe.