Source: CSO

Irish Economy: The CSO reported today that in the first quarter of 2008 GDP decreased by 1.5% at constant prices compared with the same period in 2007 while GNP increased by 0.8% in volume over the same period. The profits of foreign owned enterprises are excluded from GNP. GNP is also affected by other income flows between residents and non-residents and the timing of these flows can be variable.

Some of the main features of the results are:

Consumer spending (personal consumption of goods and services) in volume terms was 3.5% higher in Q1 2008 compared with the same period of the previous year.

Capital investment, in constant prices, was 18.6% lower in Q1 2008 than in Q1 2007. The decline in house building was the biggest factor in this decrease.

Net Exports (exports minus imports) in constant prices were €34 million lower in Q1 2008 compared with Q1 2007.

The volume of output of Industry (incl. Construction) decreased by 5.2% in Q1 2008 compared with Q1 2007. Within this the output of the Construction sector fell by 16.4% over the same period.

Output of Distribution, Transport and Communications was up 0.6% while Output of Other Services was 4.5% higher in the first quarter of 2008 compared with the same period of last year.

On a seasonally adjusted basis GDP decreased by 0.2% in volume terms while GNP increased by 0.9% in the first quarter of 2008 compared with the previous quarter.

GDP increased by 6.0% in 2007

Detailed national accounts for 2007 show that Gross Domestic Product (GDP) increased by 6.0% in constant prices while Gross National Product (GNP) increased by 4.1% compared with 2006. The corresponding average growth rates for the 5 year period 2002 to 2007 were 5.5% for GDP and 5.3% for GNP. These annual results are based on more complete and more detailed data than were used for the quarterly accounts.

Details of expenditure on GDP show that:

Consumer spending increased by 9.4% in 2007. The increase in Government expenditure was 10.1%. When price rises are discounted the real increases in these sectors were 6.3% and 6.0% respectively.

The growth in Government current spending was the highest in the 5 year period 2002 to 2007.

Investment in construction and capital equipment rose by 5.3% in money terms, which is equivalent to 1.2% in real terms. The value of stocks decreased by €111m in real terms.

Exports of goods and services exceeded imports in money terms by €20,373m in 2007 as compared with €19,036m in 2006. Net factor income outflows to the rest of the world increased from €24,830m in 2006 to €29,393m in 2007.

The volume of output of Other Services increased by 7.4% in 2007 compared with 2006 while output of Distribution, Transport and Communication was up 5.8% during the same period. Output of Industry and Building increased by 7.9% in volume in 2007 compared with 2006.

Rossa White, economist at Davy Research says Irish economy avoids technical recession in Q1, but bottom line hides some worrying trends

GNP expands in Q1, having slipped in Q4 2007

• The Irish economy grew 0.9% in GNP terms (the best measure of Irish activity) quarter-on-quarter (qoq) seasonally adjusted in Q1 versus a 0.7% decline in Q4 (revised from -2.2% originally).

• So the economy did not have two negative qoqs and, as such, avoided technical recession. GNP expanded by 0.8% compared with Q1 2007.

• GDP slipped 0.2% qoq in Q1 and was -1.5% year-on-year (yoy). The reason GDP performed worse than GNP is that net factor outflows declined. In other words, the gap closed between the income accruing to foreign residents on their investments here and the income generated by Irish residents' investments abroad.

Consumer spending held up due to spending on services

• As we anticipated, consumer spending held up due to strong spending on services. Retail sales fell 0.2% yoy in volume in Q1, but spending on services was up 8% yoy. So consumer spending rose 3.5% yoy overall. Part of this was due to a spike in Irish tourists' spending abroad, but of course this washes out in imports (counts as service imports).

• Investment was down 18.6% yoy, led by residential (-25%), non-residential building (-15.8%) and weaker machinery and equipment spending (-12.4%).

• Exports rose only 0.5% (service exports were somewhat disappointing at +4% in value) and imports increased 0.7%.

Overall, even if a little out-of-date, these figures highlight the weakness of the economy

• We may have avoided technical recession, but the figures on the whole point to trends that will continue throughout the year.

• Housing is set for much bigger falls in the second half as the collapse in housing starts feeds through to completions.

• Non-residential building is also declining.

• Business investment is weak, highlighted by the slippage in machinery and equipment investment.

• Service exports also disappointed, having grown at double-digit rates in recent years.

• The only bright spot was consumer spending on services, but this area will be pressured in the second half of 2008 by gas and electricity price hikes.

• We will look at our forecasts in the light of the Q1 figures. At least the negative carryover into the year was revised up significantly (Q4 qoq was -0.7% versus -2.2% previously), which means that a full-year of growth on average is still likely. We retain our 1% volume forecast for now, but we may well tweak some components within the total.

National Accounts show worrying slowdown in exports - IBEC

IBEC today said that the most recent National Accounts figures from the CSO show that the export sector is coming under increasing pressure. The CSO data show that economic growth has slowed considerably from last year and expanded just marginally in the first quarter of the year.

Commenting on the CSO figures IBEC Senior Economist Fergal O’Brien said "the most disappointing aspect of today’s CSO figures is the performance of the export sector. We knew from the monthly merchandise trade data that goods exports has stalled but it now appears that services exports are also under pressure. Services exports grew only marginally in the first quarter of the year and the trend has slowed dramatically. It is clear that currency factors are placing inexorable pressure on both goods and services trade. It is now in everyone’s interest that issues around Ireland’s declining competitiveness are urgently addressed."

O’Brien continued"as expected, the construction sector acted as a major drag on economic growth in early 2008. The only positive in today’s data was that consumer spending on services held up reasonably well. Overall, however, today’s figures confirm that the economy is heading for difficult times and economic forecasts are likely to be trimmed further in the coming months."