Real growth now closer to 3.5pc despite talk of new boom – Davy
Real growth in the economy may be around half the official rate – a still healthy 3.5pc – but not comparable to the early years of the Celtic Tiger boom in 2000s, Davy Stockbrokers has warned.
Figures published by the Central Statistics Office (CSO) yesterday show the Irish economy expanded by 7pc in the year to the end of September.
The data shows the economy is on course to have grown by 7pc by year end.
Austin Hughes, an economist at KBC Irish, said the economy is on track for its strongest performance since 2000, when it registered 10.2pc expansion.
Recent business output and consumer confidence trends indicate that growth is also likely to have carried through into the end of the year, Goodbody Stockbrokers economist Juliet Tennent said.
Gross domestic product (GDP), the standard measure of the size of an economy, increased by 1.4pc the three months to the end of September – a period referred to as the third quarter of the year.
That is more than four times the European average.
The more domestically-focused gross national product (GNP) measure dropped 0.8pc over the same period, due to a €1bn increase in payments out of Ireland to multinationals. It is up 3.2pc on the same time a year earlier.
In a note of caution, Davy Stockbrokers economist David McNamara said the economy here is growing “solidly” but not as spectacularly as the headline figures indicate.
Irish economic data is volatile because of the unusually large impact of multinational corporations with a base here, Mr McNamara said.
“I don’t think we are seeing the start of a boom cycle like that of the early 2000s,” he said.
The latest data shows that 35pc of investment activity reflected in the latest GDP statistics was driven by factors including multinationals moving patents onshore as a result of their own internal reorganisation, he said.
That may be a reaction to the global tightening up of tax rules, and is likely to be feeding into this year’s rise in corporate tax receipts.
According to Mr McNamara, a 3pc rise in employment and an increase in consumer spending this year, also shown in the latest data, are a better gauge of the economy.
The CSO data showed consumer spending is up 3.6pc on the same time last year. Exports, including services, have increased by 12pc. Agriculture, forestry and fishing is up 16pc year-on-year, with capital investment up a huge 35.8pc.
The figures show building and construction is up 3.5pc – less than predicted. “There is a bit of a lag in construction, but I think that sector is now ramping up,” Mr McNamara said.
Tracing the recovery, it was initially led by exports, the latest data shows consumer spending and the third leg will hopefully be gains in construction, he said. Low inflation and still high unemployment levels show the economy is not overheating, Mr McNamara added.
Finance Minister Michael Noonan said the CSO figures confirm that the recovery is firmly embedded. “The increase in economic activity is broadly-based. Domestic demand – spending by households and firms in the domestic economy – increased strongly once again, reflecting the ongoing improvement in confidence,” he said.