Cross-border shoppers cost State €300m in tax revenue
Shoppers stocking up on cigarettes, petrol and alcohol north of the border may be behind a fall in excise duties over the last year, the Central Statistics Office(CSO) suspects.
The Brexit-induced weakness in the pound is already hitting car sales here, and now the first signs of an uptick in cross-border shopping have appeared in the national accounts.
The CSO said the €300m fall in taxes on products compared to last year, the bulk of which is excise, could be down to shoppers capitalising on the weakness in sterling.
Personal spending is also down 1.1pc quarter-on-quarter, largely reflecting the fall in car sales here.
"In relation to taxes and subsidies, they are down by 4.6pc. This is largely to do with reduced excise receipts," said Michael Connolly, CSO senior statistician.
"I think it's probably a bit early to say categorically what the cause of this is, but it's related in some way to the weakness in sterling and cross-border activity, cross border shopping and cross border purchases."
The pound weakened to around 93 pence in recent weeks against the euro - heaping pressure on exporters - but it has strengthened to around 87 pence now on expectations that the Bank of England could be about to raise interest rates in the coming months.
Data released by the CSO yesterday shows that the economy, in GDP terms, grew by 1.4pc in the three months to June compared with the previous quarter, and 5.8pc year-on-year.
GNP fell 4.6pc on a quarterly basis, but the CSO said this reflected the flow of multinational profits.
GDP has fluctuated considerably in recent quarters, highlighting the problems associated with relying on the measure to gauge the health of Ireland's open economy.
The expansion in the months to June followed a revised 3.5pc contraction in the first three months of the year and a 5.8pc jump in the final quarter of last year. In 2015 GDP surged by 26pc, making international headlines and prompting one renowned economist to dub it "leprechaun economics".
In response, the CSO, in conjunction with the Central Bank, is publishing a new metric called GNI* to strip out the volatile effects associated with the multinational sector. Experts also say employment and other economic gauges such as consumer spending gives a better picture of the health of the economy than GDP.
GNI* will be fully phased in by the end of 2018 and has shown that at €189bn, the economy is nearly one-third smaller than the size suggested by the GDP figures.
Finance Minister Paschal Donohoe said the Government's target for GDP growth this year remains on track.
"Today's data provides clear evidence of continued momentum in the economy this year with annual GDP growth of 5.8pc recorded in the second quarter. Importantly the growth in the economy is broadly balanced with positive underlying contributions from both the domestic and external sectors."
Analysts remained upbeat on the economy's performance.
"With the latest readings from all three PMIs - services, manufacturing and construction - well above the 50 line separating growth from contraction we see no reason not to expect solid growth into the year end," said Philip O'Sullivan, economist with specialist bank Investec.
Alan McQuaid of Merrion Capital said the GDP numbers are positive, "especially when one allows for the distortions of IP products on the economy".