It's official - Ireland has entered a recession
The construction industry has borne the brunt of the economic downturn
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Ireland's economy shrank for a second straight quarter in the three months through June, becoming the first euro-area country to enter a recession this year.
Gross domestic product contracted 0.5 percent from the previous quarter, when it shrank 0.3 percent, the Central Statistics Office said today in Dublin. From a year earlier, the economy shrank 0.8 percent.
The slump in Ireland's economy may be followed by recessions in Germany and Spain, according to the European Commission, which has cut its forecasts for growth across the euro area. In Ireland, the housing collapse, coupled with the global credit crisis, has forced the government to slash spending to keep its deficit in check and led the country's benchmark stock index to fall more than any other in western Europe this year.
''It is clear that the domestic economy has already entered recession, as evidenced by the fall in consumer and investment spending,'' Dermot O'Leary, chief economist at Goodbody Stockbrokers in Dublin, said before today's report. ''Judging by the state of our main trading partners, it may be too big of an ask for them to take up the slack.''
From a year earlier, consumer spending fell 1.4 percent in the second quarter from a year earlier, the first year-on-year decline in at least 11 years, according to the statistics office. Investment plunged 19 percent from a year earlier, led by a drop in homebuilding. Exports rose 2.4 percent and imports fell 1.1 percent.
The contraction follows a decade-long boom sparked by exports in the mid-1990s and then extended by record homebuilding. The economy has expanded around 7 percent a year for a last decade, three times the euro-area average. Ireland hasn't had a full-year economic contraction since 1983. (Bloomberg)
- Fergal O'Brien
