What to make of Ireland’s latest GDP data?
Once again, Ireland is in technical recession. While the Central Statistics Office (CSO) found the economy contracted 1.9 per cent between July and the end of September – slightly worse than a preliminary reading announced in October – perhaps of more significance were revisions to previous quarters. With those revisions taken into account, the economy has now contracted for four successive quarters.
The data, however, doesn’t present a uniform picture of the economy.
For a number of months now we have seen declines in the multinational-focused sectors that turbocharged growth in recent years. Notably pharmaceutical exports have slipped sharply. Therefore, it isn’t a surprise to see multinational-dominated sectors decline 3.8 per cent during the quarter. Given the fact that that those sectors accounted for more than half of the total value added to the economy, an overall contraction became more or less inevitable.
Looking at the more domestic side of the economy though, there are grounds for optimism. Personal spending on goods and services, which the CSO describes as a key measure of domestic economic activity, actually increased by 0.7 per cent. Modified domestic demand, often seen as a better measure of the real economy than just GDP, was broadly unchanged compared with the second quarter of the year.
You can read many things into economic data, but perhaps there are signs now that the domestic economy is doing just fine at the moment, even as the internationally focused side is showing signs of struggling. That would be a reverse of what we have seen for the past several years, where multinationals powered economic growth to the point of absurdity. After all, that was what led to the dismissal of GDP as a relevant measure for Ireland’s economic health (remember Leprechaun economics?).
Still, there is little doubt that a slowdown globally, even if most people in Ireland aren’t feeling it day to day, would eventually have an impact here. As a small, open economy with so many big multinationals on our doorstep we are arguably the most vulnerable economy in western Europe to what way the international wind is blowing.