The economy continued to grow strongly in the second quarter of the year, according to the latest data from the Central Statistics Office (CSO).

The CSO's Quarterly National Accounts show that gross domestic product (GDP) - which measures the amount of goods and services produced in the economy each year - grew by 5 per cent in the three months compared to the same period last year.

Gross national product (GNP), which excludes the profits of foreign-owned enterprises, grew by 9 per cent.

However, this large increase is due to the fact that net factor outflows in the second quarter of 2005 were unusually large and resulted in a low GNP figure for that quarter, the CSO said.

"It's down to unusually high repatriations in the second quarter of 2005 which were the highest on record," said Michael Connolly, senior statistician in National Accounts at the CSO.

The economy was boosted by strong growth in consumer spending in the quarter, which rose by 6.7 per cent on the same period in 2005.

While rising interest rates and energy prices will impact on consumers in the second quarter, Bloxham chief economist Alan McQuaid said he expects consumer spending will rise by 6.2 per cent for the year.

Government expenditure was up 4.8 per cent, while capital investment was 2.2 per cent less than in the same period in 2005.

"That would normally be a cause for concern because it is a lower level of investment in the economy but the fall is mainly caused by the absence of aircraft imports which contributed to capital formation in the second quarter of 2005," said Mr Connolly.

Excluding this factor, overall fixed investment was up almost 5.5 per cent in the year.

Output from industry rose by 6.8 per cent, while construction continued to perform robustly with overall growth of 7 per cent. New housing output was up 4.9 per cent while infrastructure and commercial building recorded growth of 12.1 per cent over the second quarter of 2005.

Output of distribution, transport and communications was up 5.6 per cent, while output of other services showed growth of 6.1 per cent in the quarter compared to the same period last year.

Net exports declined by €131 million in the quarter, an indication that increases in consumer spending are being driven by imports from abroad, with exports failing to keep pace.

Separate figures released by the CSO showed a €1.77 billion current account deficit in the second quarter, up €346 million on the same period in 2005.

The overall deficit for the first half of 2006 amounted to almost €3.8 billion, up almost €700 million on that for the same period in 2005.

"The balance of payments current account deficit is probably the thing that people would get most concerned about," said Mr Connolly. "Some people would see this as a sign of an economy heating up."

Chief economist at Goodbody Stockbrokers, Dermot O'Leary described the performance of the external trade sector as "underwhelming". "While exports were ahead by 5.9 per cent year on year in the first half of the year, imports grew by an even more impressive 6.8 per cent over the same period. Therefore, while the economy continues to grow at a rate above 5 per cent, the contribution from net exports is zero," he said.

However, Mr O'Leary said that the overall figures confirmed that the domestic Irish growth story remains on track. "Our estimate of 5.5 per cent GDP growth for the full year still seems realistic at this stage, while we will be making small alterations to our GNP estimates," he said.