Analysis: On the surface, the latest Exchequer returns data suggest that the economy is racing ahead and taking the Government's financial position along with it.

The total tax revenue intake for the first half of the year is two per cent higher than expected at budget time.

The spending outturn is also (on the face of it) favourable, with an actual increase in total voted expenditure of just over six per cent - considerably below the expected figure of 11 per cent.

As a result, the "mid-stream" exchequer deficit stands at just under €600 million. This appears favourable when compared with the €3 billion deficit projected for the year as whole.

A deeper look is warranted. The positive revenue performance is coming from strong growth in Vat receipts, excise duties and, to a lesser extent, growth in stamp duties. This growth is driven by strong consumer demand - especially for cars. The Central Bank recently continued its warnings about the persistent strength of consumer lending.

Rates of increase for both mortgage and non-mortgage lending continue to be in double digits.

Under these circumstances, it would be surprising if strong tax revenues did not materialise in those revenue categories most affected by them.

We might ask whether we should be comfortable about this kind of revenue growth and whether it is a sustainable basis on which to discuss the scope of tax cuts in the next budget.

In 2001, the Government based strong increases in spending on tax buoyancy, only to see that buoyancy disappear the following year.

This forced an embarrassing reversal in capital expenditure and a hike in indirect taxes. Budgetary measures based on unsustainable or short-term revenue developments could produce similar policy reversals in the future.

The poor performance of other tax categories adds to this concern. Compared with expected levels, corporation tax receipts are just over six per cent lower.

Some timing factors may be at play, but this is not the whole story. Income tax receipts are also disappointing.

In spite of strong employment growth in the first quarter - 72,000 jobs in the first quarter of 2005 compared with the same period last year - income tax receipts are lower in the first half of this year compared with the first half of 2004.

Admittedly, the information on tax receipts and employment relates to different periods, but if employment data for the second quarter of this year continues to show strong growth, then we must suspect that jobs are increasingly being created in low-paid sectors of our economy. This raises the prospect of continued weakness in income tax receipts.

Turning to expenditure, the picture of lower than expected expenditure appears positive, and a little surprising. The reforms of the stability pact, concluded earlier this year, gave the Government increased freedom to borrow for infrastructure.

Any government would be expected to respond to such an opportunity with gusto. Not so. In the first six months of the year, capital expenditure actually fell by about 12 per cent.

With many sectors of the economy crying out for infrastructural relief, this apparently positive news is not so positive.

Exchequer returns for a six-month period can never lead to hard and fast conclusions about the state of the economy.

But a subtle picture is emerging of an economy that is increasingly influenced by growth in consumer debt, resulting in imbalanced tax revenue growth. Neither is the Government's failure to meet its capital spending plans a source for comfort.