Growth is fragile at 0.2pc but nine-month trend holds steady
THE economy grew slowly over the autumn but there are signs that consumer spending and exports are on the mend, the Central Statistics Office (CSO) said yesterday.
Eagerly awaited growth figures from the third quarter show that gross domestic product (GDP) expanded 0.2pc in the third quarter and better than previously thought in the previous two quarters as well. It was the first time in four years that the economy posted growth in the first nine months of the year.
"The economy is flat on its back," said Michael Connolly, the CSO statistician responsible for collecting and analysing the complicated data used to calculate economic growth.
While the headline figure is little changed, various parts of the economy are showing signs of movement beneath the surface. Declines in pharmaceutical exports are being replaced to some degree by rising software sales. Consumer spending is also showing signs of life after years in the doldrums.
The positive growth was similar to the average across the European Union but stood in contrast to the economy of the eurozone, which shrank slightly in the same period.
"The worry is obviously you can't see consumer spending holding up much given the austerity in the Budget," said Alan McQuaid, an economist at Merrion Capital in Dublin.
"Clearly, we are the only country that is growing among the peripherals so that helps in our perception abroad with international investors."
Exports rose 0.3pc in the third quarter, while imports increased 2.1pc, the CSO said. Consumer spending gained 0.5pc and investment spending climbed 8.5pc – an important sign that companies are slowly regaining confidence in the future and beginning to invest.
Gross national product (GNP) fell 0.4pc in the third quarter from the second quarter but rose 3.7pc from the year earlier period. GNP was flattered by contributions from UK companies which have located operations here to escape UK tax rules introduced by Gordon Brown.
That's a change from previous years, when GDP tended to be exaggerated by contributions from multinationals that had little effect on the real economy.
Analysts said that it makes more sense to focus on GDP these days because of these distortions and the great store that the troika and other investors place on GDP.
Compared with a year ago, the CSO said that GDP rose by 0.8pc while GNP increased by 3.7pc.
"Today's release does little to change the bigger picture," said Davy's Conall Mac Coille.
The small 0.2pc rise in GDP in the third quarter, driven by domestic demand, was broadly as expected given positive retail sales figures, and a bounce-back in investment spending following a very weak second quarter, he added.
The current account surplus was close to €5bn in the first three quarters of 2012, or 4.3pc of nominal GDP, the CSO added.
Net trade detracted from growth in the third quarter, with a 2.1pc rise in imports, more than offsetting a small 0.3pc rise in exports.
Overall, Irish export growth continued to slow, down to 2pc year-on-year, compared with the 5pc calendar year growth in 2011.