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We're back in recession as exports plummet

WE'RE back in recession and this time it's our low consumer spending and weakened export levels that are keeping us down.

Ireland's export business was long billed as the saviour of our flailing economy.

But in the past three months alone, exports fell by 3.2pc – the biggest quarterly decline on record. In addition, consumer spending has plummeted significantly as there is less disposable income available.

The property tax put a dent in households' weekly budgets for the first quarter, and groceries in the supermarket are notably more expensive than last year.

Recent research found that some grocery items have risen 20 times faster than inflation since 2008.

All of this means that Irish people are less inclined to buy and avail of goods and services – pushing domestic demand to a new post-crash low point.

The Budget has been moved forward to October this year and representative groups have urged the Government to exclude new taxes on the consumer and the economy.

"Consumer spending fell by 3pc compared to the previous quarter, the sharpest drop we have seen since the start of 2009," said IBEC Senior Economist Reetta Suonpera.

"However, unlike four years ago, consumer fundamentals such as employment and incomes are stabilising and improving.

"Weak confidence, exacerbated by the introduction of the property tax, is likely to have been the main culprit to the sharp decline this time around."

Ms Suonpera said that there is "room to manoeuvre in terms of the fiscal adjustment" and Budget 2014 is an important opportunity for the Government to support the economy.

Gross domestic product was squeezed by a further 0.6pc – the third consecutive quarter of contraction in GDP.

BLIP

Economists define recession as two back-to-back quarterly falls. The blip on Ireland's record will no doubt cause headaches for the Government.

The CSO figures will also come as a blow to eurozone policy makers who held Ireland up as a rare example that strict austerity measures work.

Fianna Fail finance spokesperson Michael McGrath pointed at the policies which were "contributing to the crisis".

"These figures paint a dismal picture of an economy that is mired in recession," said Deputy McGrath.

clairemurphy@herald.ie


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