Economy posts strong growth in first quarter

The Irish economy is showing no signs of slowing down despite increased inflation, according to new figures published by the Central Statistics Office (CSO).

Dr Dan McLaughlin

Growth was powered by strong consumer spending - the personal consumption of goods and services - which increased by 6 per cent on the same period last year and by capital investment which was 11.1 per cent higher than in the first quarter of 2005.

However, figures also released by the CSO today show inflation rose 3.9 per cent year-on-year in June, unchanged from May, with prices up 0.3 per cent month-on-month.Ireland's GDP rose by 5.8 per cent in the first quarter of the year while GNP increased by 7 per cent in the same period.

The disparity between GDP (which includes the profits of foreign multinationals) and GNP can be attributed to foreign firms repatriating their profits outside the country.

"These numbers are very strong, very positive. Based on these figures you're looking at overall growth for the year of between 5 and 6 per cent rather than 4 or 5 per cent," Bloxham Stockbrokers' Chief Economist Alan McQuaid said.

Dan McLaughlin, chief economist at Bank of Ireland, said growth was likely to be stronger this year than firstly anticipated.

"My forecast was for GDP growth this year of 6 per cent, driven very much by consumption, which was above consensus. I suspect that consensus will have to go up. I'm not going to change my figure," he said.

Mr McQuaid said there was a risk that the appreciating euro could hurt exports later in the year but overall the signs were healthy. "It's a very positive start to the year," he added.

A further set of data showed inflation continues to outstrip the euro zone average.