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Economic boost clouded by deepening euro crisis

•A survey of managers suggested the eurozone economy is on the brink of recession.

Chinese property stocks slumped after reports that the country's banking regulator was trying to restrict lending to developers.

EU statistics office data showed that new industrial orders in the eurozone fell by 2pc in July, on top of a 1.2pc drop in June, raising fears that production will slow in coming months.

The Irish figures show the economy was still depending on exports in the first half of the year. National income (GNP), which excludes the profits of foreign companies, grew by just over 1pc in the quarter.

Conall MacCoille, chief economist at Davy stockbrokers, said: "The figures are far better than expected. Exports grew by 1pc on the quarter, consumer spending increased marginally, and investment spending rose by 6.4pc."

John Fahy, economist at Ulster Bank, said: "The increase in consumer spending on goods came from the motor vehicle sector. This is largely due to the car scrappage scheme, and this scheme has now expired. Spending on goods could fall again in subsequent quarters."

Taoiseach Enda Kenny said the figures already showed a drop-off in exports from the impact of the downturn in other countries. "But it (the second quarter growth) is part of the confidence-building measures I'm happy about. But clearly we have an enormous challenge in front of us," Mr Kenny said.

The figures also showed the continuing fall in Irish prices which is deflating the money value of the economy. Although the output in GDP was 2.3pc higher than last year, lower prices meant the value fell by 0.3pc.

This limits tax revenues for the Government and makes it more difficult to meet budgetary targets, because these are measured against the money value of GDP.

CSO statisticians said falls in the dollar had reduced the euro price of multinational exports. And the cost of building new houses fell 6pc.

"It is a tale of two economies once again," said Dermot O'Leary, chief economist at Goodbody Stockbrokers. "Less attention has been paid to another measure of economic sustainability for the economy, that of the current account position with the rest of the world.

"The surplus over the 12 months to June was the biggest since 1999, which makes it clear large savings in the private sector are offsetting the budget deficit in the public sector."

Irish Independent