SHARP DROPS in consumer spending, capital investment, construction activity and industrial output led to a 7.5 per cent decline in real GDP in the final three months of 2008, compared with the same period in 2007.

The Central Statistics Office (CSO) quarterly national accounts show that the economy weakened considerably at the end of last year, a trend that economists said would continue in the months ahead.

Over 2008 as a whole, GDP fell 2.3 per cent, while there was a 3.1 per cent drop in GNP.

In the final quarter, real GNP fell 6.7 per cent compared to the same period the previous year, while consumer spending dropped 4 per cent. Both goods and services spending is now in retreat. For the year as a whole, personal consumption of goods and services was down 0.8 per cent.

Capital investment in the final quarter plummeted 30.6 per cent year-on-year.

Investment in new housing fell 51 per cent, while investment in machinery and equipment was also nearly half of what it had been in the same period in 2007, which was mainly due to a decline in aircraft imports.

Net exports were €1.6 billion higher in the fourth quarter year-on-year. This was because the decline in imports over the period was steeper than the decline in exports.

Exports fell 4.9 per cent in the fourth quarter compared to the same period in 2007, with goods exports down 8.4 per cent and services exports down 0.4 per cent. Imports of goods and services dropped 10.4 per cent year-on-year in the fourth quarter.

The volume of output in the construction sector fell 24 per cent year-on-year in the fourth quarter, while the volume of industrial output excluding construction fell 7.9 per cent.

Davy Research economist Rossa White said the quarter-on-quarter increase in services exports was the one “bright spot” in the data. The 2.6 per cent quarter-on-quarter decline in exports looked good compared to declines experienced in other countries, he noted.

Bloxham economist Alan McQuaid said the 7.5 per cent year-on-year decline in fourth quarter GDP could worsen to double-digit declines over the coming quarters.

In separate data, the CSO said the current account deficit on the balance of payments in the fourth quarter of 2008 was the lowest in four years.

The deficit for the fourth quarter was €133 million. This brought the deficit for the full year to €8.37 billion, more than €1.9 billion lower than in 2007.

Irish investors invested €1.9 billion overseas.