Economy at standstill for six months, CSO reveals
Exports, spending healthy but 18pc housing plummet drags growth rate to zero
The economy showed no growth between April and September as a plunge in house-building, sharper most than even economists had expected, dragged it down.
Figures from the Central Statistics Office show that output (GDP) was 4.1pc higher in the third quarter of the year than in the same period last year. However, at €45.3bn, GDP was less than in the first quarter, when seasonal factors are included.
It is the first time such a decline has been seen since the dot.com-induced downturn of 2001. This time the culprit was an 18.5pc fall in house construction compared with the booming third quarter of 2006.
"The size of that decline may have surprised some," said Pat McArdle, chief economist at Ulster Bank. "However, the offsets were surprisingly strong. Home improvements and other building and construction were up 21pc in volume, but this was not sufficient to keep overall building and construction in the black."
There was greater disappointment over a 5.5pc growth in non-residential building and a 12pc drop in machinery and equipment investment. "The building figure suggests that commercial building slowed to zero, because we know government infrastructure spending was strong," said Rossa White, economist at Davy Research.
Personal spending was up 6.4pc in real terms, which was in line with forecasts. However, there seems to have been a switch in spending from goods to services, which are not included in monthly retail sales figures.
Slower job growth, a squeeze on spending power from higher oil and food prices and increased nervousness about the economic outlook may mean a notably more modest pace of consumer spending increase in the year ahead," said IIB Bank economist Austin Hughes.
"We still think consumer spending will grow a solid 4pc next year, with a less threatening interest rate outlook and a gradual recovery in consumer confidence," said Austin Hughes, economist at IIB Bank
Export performance was strong, with an 8pc increase. However, imports grew almost as fast, leaving only a small contribution to overall growth.
"The growth in services exports was particularly strong in the third quarter of 2007, driven by a rise in business services," said Ronnie O'Toole, chief economist at National Irish Bank.
"Based on current trends, Ireland will export more services than goods in 2010. One of the reasons for the resilience of services exports is that sales to the US are much lower for services than for manufactured goods, so the weakness of the dollar is unlikely to limit services exports to the same extent."
National income (GNP) grew 6pc over 2006, but this was partly due to large outflows of income from foreign companies in the same period last year.
However, Ireland's overseas earnings from investments and property continue to boost GNP.
"These grew faster than foreigners' earnings on investments here, so net outflows fell 5pc. The figures mean we will be revising up our forecast for GNP growth this year from 4pc to 5pc," Rossa White said.