The economy continued to grow in the second three months of the year, according to the latest figures from the Central Statistics Office.
Measured by GDP, which includes the activities of multinationals, the economy grew by 0.5% compared to the first quarter of the year.
Modified Domestic Demand, which excludes some of the activities of multinationals and gives a better picture of what is happening in the domestic economy, grew by 1%.
However, on an annual basis, the economy measured by GDP shrank slightly by 0.7%, today’s CSO figures show.
When measured by Modified Domestic Demand, it declined by 0.3% in the second quarter compared to the same quarter a year ago.
Irish economic numbers are often volatile due to the outsize presence of multinationals in sectors like IT and pharmaceuticals.
Today’s CSO figures show that in the second three months of this year, there was a fall in exports across the multinational sector. This may reflect a slowdown in global markets.
But, just to confuse the picture, there was strong increase in industrial output. So, it may be that multinationals were stockpiling in the second quarter and exports may recover later in the year.
Back at home, there was an increase in spending by consumers which helped buoy the domestic economy.
However, output in construction fell by just over 2%, which may reflect increased costs in the industry.
Despite an increase compared to the first quarter, both GDP and Modified Domestic Demand fell compared to the same quarter a year ago; an indication perhaps that the economy is settling down to a more moderate pace of growth.
Commenting on today’s figures, Finance Minister Michael McGrath said that as has been well documented, multinational production in Ireland is extremely volatile.
Given the outsized role the multinational sector plays in the economy, GDP is clearly not a useful measure of domestic living standards, he stated.
He said he was encouraged to see that Modified Domestic Demand (MDD) – his preferred metric of domestic economic activity – grew at a solid pace in the second quarter of the year.
“These data are consistent with trends in the labour market, where figures published last week show employment at its highest level ever at end-June,” he said.
He also noted that consumer spending was a key driver of growth in the second quarter, increasing by 0.9% over the quarter.
He said this reflects a number of factors including the easing in inflationary pressures over recent months, the strength of the labour market and the role that Government support has played in supporting households.
“With three-quarters of our working age population in employment – a record high – this should support continued expansion of consumer spending in the coming quarters,” the Minister said.
He also said that while today’s data confirm continued growth in the domestic economy, he was conscious of several headwinds.
“Our economy is clearly operating at full-employment and capacity constraints, in both our housing and labour markets, are increasingly binding. Externally, growth is slowing in some of our main trading partners, and this could have knock-on implications for Irish exports,” he added.