CSO figures reveal economy shrank faster than feared
THE economy shrank faster than most economists had feared in the last quarter as exports unexpectedly fell.
Gross domestic product contracted 1.6pc in the final three months of last year, bringing the total decline in GDP to 14.6pc since the end of 2007.
The main driver for this decline was exports, which fell 1.4pc in the final quarter from the previous quarter after advancing steadily earlier in the year.
The contraction in the final months of 2010 brought the decline in the year to 1pc, or more than three times what Ulster Bank had been predicting.
"Today's fourth quarter national accounts data indicates that the road to recovery for the Irish economy is set to be a bumpy one," Ulster Bank economist Lynsey Clemenger said yesterday.
Falling exports were not the only reason for GDP shrinking. Consumer spending, domestic demand and investment were also down. Consumer spending declined 0.4pc on the quarter while investment dropped 2.3pc.
Domestic demand in total was down 0.5pc, although some economists said there were signs that it was stabilising. Imports slipped 0.1pc but government spending rose 0.3pc -- a figure that was described as "rogue" by CSO statisticians.
Based on gross national product, the economy shrank 2.1pc in 2010 after a 10.7pc drop in 2009. Fourth quarter GNP advanced 2pc but much of this increase was explained by technical issues. "This has been driven largely by a reduction in expatriated profits from multinational exporters, which is hardly a sign of strength," said Neil Gibson, an economic advisor Ernst & Young.
The reason for the decline in exports was not clear from the figures published by the Central Statistics Office yesterday but some economists speculated that December's poor weather might have had some effect -- as it did in several other North European economies.
"Adverse December weather may, however, be part of the explanation," said Ernst & Young's Mr Gibson in a note to investors, which also suggested the declines in economic growth might be due to continued destocking of inventories seen in nine of the past 10 quarters.