In recent years the GNP data which mainly is net of the profits of foreign multinationals, has been impacted by foreign companies opening headquarters in Ireland with little if any operational activity. These firms are treated as Irish companies and their performance overseas has an impact on Irish data.
Ireland: GDP or GNP? Which is the better measure of economic performance?
The Balance of Payments current account surplus in the second quarter of 2013 was €2.90bn was the same as surplus in the second quarter of 2012. A surplus of €9.79bn on merchandise was offset by a deficit of €6.890bn on invisibles in the quarter.
Current account: Compared with the second quarter of 2012, merchandise exports at €21.734bn were down €224m while merchandise imports at €11.95bn were almost unchanged.
Services exports at €24.07bn, up €1.07bn mainly due to increased computer services exports. Service imports increased by €1.09bn to €22.56bn driven by increases in royalties/licences payments and imports of miscellaneous business services.
Investment income earned abroad of €13.99bn fell by €899m compared with one
year earlier while investment income payable to foreign investors at €21.65bn
dropped by €1.29bn.
Within Portfolio investment, increased investment in overseas equity of €9.86bn was partly offset by increased investment in Irish equity of €5.20bn in the quarter.
Other investment assets fell by €16.49bn in the second quarter of 2013 mainly due to a decrease in loans, currency and deposits of €18,245m. Other investment liabilities fell by €16.52bn in the quarter.
Dermot O'Leary of Goodbody commented: Underlying positives in Q2 numbers; "First sequential growth in four quarters After three consecutive quarterly declines, GDP returned to modest growth in Q2, helped by a welcome rebound in exports. On a seasonally-adjusted basis, GDP grew by 0.4% qoq, following a 0.6% qoq contraction in Q1. However, on an annual basis, GDP fell by -1.2%, a similar outturn to Q1 (-1.0% yoy). While the Government is likely to be reducing its GDP growth forecast ahead of Budget 2013, we are unlikely to be making any meaningful changes to our own 0.7% GDP growth forecast in 2013.
Stable domestic demand trends continue…Our preferred indicator continues to be domestic demand. While this can also have its drawbacks, it gives a truer picture of underlying domestic activity, in our view. In Q2, domestic demand declined by -1.1%, relative to -4.3% yoy in Q1. However, planes continued to have a large impact on this outturn. While investment in planes has no net impact on GDP, as the planes are imported, they do lead to significant volatility in domestic demand numbers. Excluding planes, domestic demand is estimated to have grown by 0.2%. As the chart shows, underlying domestic demand growth has been stable for four quarters.
…but investment continues to improve: On the domestic front, the most positive element of today’s numbers is the continuing improvement in core investment trends. In Q2, while total investment grew by 1% yoy, core investment (i.e. excluding planes) grew by 12% yoy, its fastest rate of growth since Q1 2006. Within this, construction activity increased by 10% yoy, while core machinery and equipment investment grew by 13% yoy.
These trends confirm our view that investment growth will be an important contributor to the return to growth in domestic demand over the coming years. Weak consumer in Q2, but Q3 is likely to be better Among the other components of domestic demand, consumption continued to contract on an annual basis, falling by 1.3% yoy (-1.1% yoy in Q1). Given the better retail sales numbers for July, Q3 may see an improvement in consumption overall. Unsurprisingly, government current spending continued to decline at a similar pace, falling by 1.7% yoy (-1.8% yoy).
Bounce back in services trade is welcomed: Given the weakness in Q1, the return of export growth in the second quarter is to be welcomed. While goods exports (-1.7% yoy) continue to be impacted by the “patent cliff”, services exports recovered in Q2 (+3.6% yoy versus +1.3% yoy in Q1), helping exports overall to grow by 1%. Given the improving trends in developed economies recently, we would anticipate a further improvement in this trend in H2."
Conall Mac Coille,
chief economist at Davy, commented
-- "Today’s Irish GDP data show a welcome 0.4% rise in Q2 2013 following
the 0.6% contraction in Q1 2013. GDP is still down 1.2% on the year. The rebound
in Q2 was driven by consumer spending up 0.7% and exports up 4.5%. Investment
spending fell by 3.4% in Q2 2013 following a 6.4% contraction in Q1. However,
excluding the volatile aircraft leasing sector, investment spending is up by
11.8%, with building and construction rising by 11.3%. Although we will
probably revise our forecasts for calendar year GDP growth in 2013 below 1%, we
still believe that activity will rebound in H2. Hence, we are unlikely to
substantially revise our forecast 2.1% GDP growth in 2014.
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