Ireland’s economy lurches back into recession
Most measures of economic activity contracted in first quarter of 2013, CSO figures show
The Irish economy shrank in the first three months of the year, pushing the country back into recession, according to new figures from the Central Statistics Office.
Gross domestic product, the widest measure of economic activity, contracted by 0.6 per cent on the previous three- month period on a seasonally adjusted basis.
The decline was the third consecutive quarter of contraction in GDP, according to the new and revised figures. Economists define recession as two back-to-back quarterly falls in this measure of output.
The weakness was driven in part by one of the biggest quarterly declines in exports on record. In just three months, the volume of goods and services exports fell by 3.2 per cent. This reflects weak demand in export markets and raises questions about the extent to which the economy has regained competitiveness.
Domestic demand, a measure that excludes imports and exports, fell by 1.5 per cent, bring the domestic economy to a new post-crash low point.
This was driven by a sharp contraction in spending by consumers. A quarter-on-quarter decline of 3 per cent was recorded in the first three months of 2013. This took place despite a seasonally-adjusted increase in employment in the quarter and stable nominal incomes. As such, an increase in the proportion of income being saved is likely to have risen. Higher savings leads to lower spending, and hence lower consumption.
Among the few positive results was an increase in gross national product, a slightly narrower measure of output than GDP.
Sectorally, output increased in agriculture, industry and some services sectors, but fell in construction and public administration.
Statisticians also revised down their GDP figure for 2012 as a whole. They had believed that GDP grew by almost one per cent last year compared to 2011. The revised figure is a marginal increase of just 0.2 per cent.
Separate figures showing the balance of international payments show that the economy remained in surplus of almost €1.2 billion. It was the first time in many years that a surplus was recorded in the first quarter of the year. These figures are not seasonally adjusted.
This is in line with trends in recent years when payments to the rest of the world for imported goods and services have declined while earnings from exports have risen.
The total foreign liabilities of all Irish residents, including companies and the Government, exceeded their foreign assets by €176 billion at the end of the first quarter of 2013, excluding the impact of Dublin’s international financial services centre.
Tánaiste Eamon Gilmore said the news on the jobs front was hugely different from the experience of four years ago. “We are seeing an improvement. We are seeing some recovery but it is still fragile,” Mr Gilmore told RTE Radio.
The report sparked angry responses from anti-austerity campaigners with David Begg, head of the umbrella trade union group Congress, warning there had a series of false dawns. “These figures serve to confirm our worst fears about the policy path being followed. We have an opportunity with the coming budget to signal a significant change of course,” he said.
Siptu economist, Marie Sherlock, said it is clear that the crisis is far from over. She said: “These results are a stark reminder of the fragility of the Irish recovery as a sharp fall in domestic demand, investment and in exports combined to ensure Irish Gross Domestic Product (GDP) remains stagnant and the economy remains in recession.”
“The 0.6 per cent seasonally adjusted drop is the third successive quarterly fall in GDP since the Irish economy went back into negative territory last summer,” she said.