Irish Economy 2011: Initial estimates for the
second quarter of 2011 show seasonally adjusted increases of 1.6% in GDP (gross
domestic product) and 1.1% in GNP (gross national product) compared with Q1 2011
data. Comparing Q2 2011 with the same quarter one year earlier, GDP at constant
prices registered an increase of 2.3% while GNP was 1.1% higher.
The Central Statistics Office said net
exports were the main contributor to annual growth:
Net exports (exports minus imports) grew by €1.89bn (23.9%) at constant 2009
prices between the second quarter of 2010 and the second quarter of 2011.
Domestic demand, on the other hand, declined by €714m (-2.2%) over the same
period, despite a significant rise in stock levels between Q1 and Q2 2011
On the output side of the accounts Agriculture,
Forestry and Fishing (+6.9%) and Industry excluding Building and Construction
(+10%) were the only sectors to record annual growth. However, the decline in
the Other Services sector (-0.7%) continued to moderate in the second quarter of
2011 compared with earlier quarters. This sector accounts for almost a half of
GDP at factor cost.
Seasonally adjusted increases in GDP and GNP:
Personal Consumption (+0.3%), Fixed Investment (+ 6.4%) and Exports (+1.0%)
increased on a seasonally adjusted constant price basis between Q1 and Q2 2011 while Government expenditure (-0.8%) and Imports (-0.6%) both declined over the
On the Output side of the accounts Agriculture,
Forestry and Fishing (+2.8%), Industry (including Building) (0.4%) and
Distribution (+0.7%) all recorded seasonally adjusted constant price increases
between Q1 and Q2 2011. As a result GDP registered a seasonally adjusted
quarterly increase of 1.6% in Q2 2011.
Net factor outflows increased by €238m seasonally
adjusted between the first and second quarters of 2011 while in overall terms
GNP increased by 1.1%.
Ireland: GDP or GNP? Which is the better measure of economic
Current account deficit under €500m in 2nd
The CSO said that the Balance of Payments current
account deficit in the 2nd quarter of 2011 was €488m - - down €543m on that for
the previous quarter and almost unchanged from the 2nd quarter of 2010. This was
due to a decrease in the invisibles deficit which went from €10.15bn in the
first quarter of 2011 to €9.71bn in the 2nd quarter. While the services deficit
at €800m was down over €1,100m on the same quarter last year, net income
outflows at €8.42bn were up almost €500m.
Other points of note are:
Current account: Compared to the 2nd quarter of
2010, merchandise exports at €21.82bn were up €167m; imports at €12.60bn were up
over €800m. Services exports at €19.8bn were up €1.35bn largely due to
increased computer services exports.
Service imports increased by €251m to €20.69bn.
Investment income earned abroad (€14.33bn) increased by over €400m compared to
one year earlier. Income payable to foreign investors at €22.68bn increased by over €900m.
Financial account: Inward direct investment
amounted to €5.89bn in the second quarter. This was mainly reinvestment of
earnings by non-IFSC enterprises.
Portfolio investment into Irish equities by
foreign investors amounted to almost €27bn in the quarter. This was mainly into
investment funds. Other investment liabilities decreased by €33.6bn in the same
Dermot O'Leary, chief economist
at Goodbody, commented:
The Irish economy performed
stronger than expected in Q2, but the devil is in the detail. See attached note
for more information.
GDP & GNP up in Q2 2011... - The Irish economy expanded for the second
consecutive quarter in Q2 in GDP terms. This is the first such occurrence since
2006. Seasonally-adjusted, GDP increased by 1.6% qoq (1.9% qoq in Q1), while GNP
increased by 1.1% qoq (-3.0% qoq in Q1). On first glance, the GDP data in
particular are better than our expectations and will translate into higher 2011
estimates. However, as with all Irish data, the devil is in the detail and we
would caution into reading too much into volatile quarterly figures.
...but it is a tale of two economies once again - Growth in both GDP and
GNP is made up of large contributions from both net exports and, particularly in
Q2, an unusually big contribution from inventory accumulation (stocks). On
the other hand, domestic demand continues to contract; it fell by 4.6% yoy in Q2
and knocked c.4% from GDP.
Big trade contribution continues - Net exports and stocks added over 6%
to annual GDP growth in Q2. Exports continued to perform very well and were up
4.9% yoy in Q2. This is made up of 4.2% growth in goods exports and 5.6% growth
in services. Stagnation in imports though also had a big role to play in the
large net export contribution.
Current a/c firmly in surplus - While much has been made of Ireland’s
large budget deficit, less attention has been paid to another measure of
economic sustainability for the economy, that of the current account. With a
current account surplus of 0.8% being achieved in the four quarters to Q2 2011
(biggest since 1999), it is clear that large savings in the private sector are
offsetting the deficit in the public sector of the economy as a whole.
Commenting on the data, IBEC
senior economist Reetta Suonperä said: “The most recent national accounts
figures from the CSO show that Ireland’s export-led recovery continued in the
second quarter of the year. Seasonally adjusted GDP was up 1.6% relative to the
first quarter, off the back of a 6.8% increase in net exports.
“The 6.4% quarter-on-quarter increase in investment is also worth noting. Though
a detailed breakdown is not available, it is likely that firm investment in
machinery and equipment continued to grow in the second quarter.
“Despite the positive start to 2011, we must acknowledge that the outlook is
much more uncertain than even just a few months ago. Much will depend on EU
leaders’ ability to resolve the Eurozone crisis, which continues unabated.
“Despite the uncertainty over the
wider global economy, in Ireland we must focus on getting our own economic
strategy right. The immediate priority for the Government is to deliver a Budget
that will not harm our economic recovery. Although spending cuts and tax
increases of €3.6 billion will be necessary, they should be delivered in a way
that will cause the least amount of damage to the domestic economy,”
Conall Mac Coille, chief economist at Davy,
Irish GDP up by 1.6% in Q2 following upwardly
revised increase of 1.9% in the first quarter
- The annual GDP growth rate in Q2 2011 was
positive at +2.3% compared with Q2 2010;
- In the first half of 2011, the Irish economy
experienced two consecutive quarters of growth for the first time since
- GNP, which excludes the profits of the
multinational sector, rose by 1.1% in Q2.
Export-led growth continues as domestic demand
- Exports grew by 1.0% on the quarter;
- Consumer spending grew marginally by 0.3%
following sharp falls in the previous two quarters;
- Investment spending rose by 6.4% in Q2
following a 2.4% rise in Q1;
- Government spending fell by 0.8% in real
terms as the fiscal consolidation continued in Q2.
Today's data are far better than expected
- Export-led growth continued in Q2 despite
the slowdown in Ireland's main trading partners;
- Substantial rises in consumer spending and
investment were always likely as the extraordinarily sharp declines
experienced in recent quarters were likely to be partially reversed;
- Risks remain that exports may fall back in
the second half of 2011, and data may be revised;
- Today's data reinforce our view that Irish
GDP will expand in 2011 for the first time since 2007.