Economy grows by 6.3% as spending booms amid looser Covid restrictions

Latest CSO data points to strong rebound in domestic and globalised sectors of economy

Minister for Finance Paschal Donohoe welcomed strong recovery in domestic economic activity. Photograph: Nick Bradshaw

Minister for Finance Paschal Donohoe welcomed strong recovery in domestic economic activity. Photograph: Nick Bradshaw

 

The economy grew by 6.3 per cent in the second quarter of 2021 as the rapid rollout of the Covid-19 vaccine fuelled a boom in consumer spending.

The latest quarterly national accounts from the Central Statistics Office show consumer spending on goods and services increased by 12.6 per cent as Level 5 restrictions eased during the quarter and non-essential retail and hospitality reopened.

This was one of the largest ever quarter-on-quarter increases in personal consumption.

The easing of restrictions also fuelled a 22.9 per cent jump in construction activity. The more globalised parts of the Irish economy also expanded with the information and communication sector expanding by 6.2 per cent and the industrial sector, which includes pharmaceutical firms, growing by 3.6 per cent during the quarter.

Net exports of goods and services, which have increased almost continuously during the pandemic, rose by 8.2 per cent.

The pick-up in activity in these sectors fuelled a 6.3 per cent increase in gross domestic product, the highest level of growth seen anywhere in Europe.

Modified domestic demand – a better indicator of domestic economic conditions as it weeds out much of the multinational activity – rose by 8.4 per cent, the second highest quarterly jump on record, second only to the third quarter of last year, when the economy bounced back after the first lockdown.

Caution

While welcoming the strong recovery in domestic economic activity, Minister for Finance Paschal Donohoe said: “Caution should be exercised when interpreting annual changes, as the comparison is with an exceptionally low base during the first lockdown.”

Nonetheless, he noted that “all sectors in the domestic economy recorded strong growth, with consumer spending and construction particularly strong”.

“Looking at housing in particular, in the four quarters to end of the second quarter this year, there were roughly 21,000 housing completions and 27,000 starts,” he said.

“This will provide much needed momentum into the second half of this year, with housing supply set to be further boosted by the Government’s new Housing for All strategy,” he added.

The Government is expected to earmark €4 billion a year in funding for its new housing strategy with up to €36 billion being spent out to 2030.

“While I am conscious that there are many risks on the horizon, not least in terms of the unpredictable epidemiology of the virus, today’s positive economic data alongside the robust tax data for August which we are publishing later today, mean that we can approach the forthcoming budget with a far greater degree of confidence than at any time since the pandemic began,” Mr Donohoe said.