Strong growth in economy and exports this year

 

THE DOMESTIC economy and exports both grew solidly in the first quarter of the year, according to figures inadvertently published on the Central Statistics Office’s website yesterday.

A surge in imports pushed the two main measures of economic activity – gross domestic product and gross national product – into negative territory.

It is a quirk of GDP and GNP accounting that an increase in imports depresses both measures, even though an economy’s purchasing of goods and services from the rest of the world is a sign of strength, not weakness.

It is the surge in imports in the first three months of the year – by 4.9 per cent quarter on quarter – that accounts for the contraction in both GDP and GNP. Imports are highly volatile owing to the purchases of items, such as aircraft, which can distort the figures.

Exports grew at 2.6 per cent on the quarter, the fastest rate of increase in two years. The strong performance came despite a downturn in demand in most foreign markets in that period.

Domestic demand, which excludes exports and imports, has three components – consumer spending, Government current spending and spending on investment goods such as buildings and machinery.

Spending on investment goods, which is highly volatile, soared in the first quarter, raising by 11.6 per cent on the pervious three months.

Spending on investment is now a fraction of its bubble-era peak, but the increase in the first quarter was the second consecutive quarterly rise, raising hopes that the five-year long decline may be over.

Government spending on goods and services also rose in the first quarter. It was the first such increase in seven quarters, but it is expected to resume its contraction as the State downsizes.

Consumer spending was the only expenditure component to contract in the first quarter. A 2.1 per cent quarter-on-quarter fall was the largest such decline since the depths of the recession in the first three months of 2009.

The two-percentage-point hike in the rate of value added tax which came into effect at the beginning of January is likely to account for consumers reducing their spending so sharply.

The figures, which are usually published in late June, were delayed on this occasion owing to substantial revisions to the 2011 numbers undertaken by the agencies’ statisticians.

Those revisions resulted in a doubling of the GDP growth rate for the full year, from 0.7 per cent to 1.4 per cent.

GNP for last year remained unchanged, with a contraction on 2010 of 2.5 per cent.

The most significant change in the new figures relates to the trend since the middle of last year.

The Central Statistics Office now estimates that exports grew much more strongly last year and it no longer believes that they contracted in the final quarter of last year.

As the chart illustrates, there has been uninterrupted quarterly growth in exports over the past five quarters. Trends in GDP, GNP and domestic demand were revised upwards in the third and fourth quarter of last year.

The figures were due to be released this morning, but appeared briefly on the agency’s website. It is the second time in a year that the Central Statistics Office has inadvertently published data before the scheduled time.

On the previous occasion, the organisation left the figures on its website. On this occasion it withdrew them and they will not be available to the public until 11am today. In a statement on the website, the organisation apologised for any inconvenience caused to its users.