The Irish economy, as measured by gross domestic product (GDP), increased by a 3.3 per cent in the second quarter compared to the first three months of the year, according to an initial estimate from the Central Statistics Office (CSO). This means the economy exited the technical recession it entered in the first quarter of this year.
The growth in the second quarter was driven by increases in the multinational-dominated sectors such as the pharma-led industry sector and the information and the technology sector.
GDP is estimated to have increased 2.7 per cent compared with the same quarter in 2022.
The results are preliminary and subject to revisions in the Quarterly National Accounts due for publication in early September.
The CSO recently published a revised GDP estimate showing a 2.8 per cent contraction in the first quarter of 2023. This, when coupled with a 0.1 per cent decline in GDP in the final quarter of 2022, meant that the Irish economy briefly entered a technical recession.
Economists say GDP is not a useful measure of the level of domestic activity in the Irish economy because of the outsized role of multinational production, which can be volatile on a quarterly basis.
Minister for Finance Michael McGrath noted the publication of the CSO’s flash estimate for the second quarter.
“Today’s data show that GDP increased by 3.3 per cent in the second quarter, more than reversing the 2.8 per cent fall recorded in the first quarter of the year. The quarterly increase was largely due to increased output in the multinational sector,” he said.
“As I have stressed in the past, modified domestic demand is a much better indicator of what is going on in the domestic economy and these data will be published just over a month from now. My department will then begin the process of producing its autumn forecasts that will underpin Budget 2024.”
Modified domestic demand, a proxy for the domestic economy, is the sum of consumer spending, government spending and investment, excluding investment in imported IP and aircraft for leasing. It also excludes changes in the value of stocks.
“That said, high frequency data suggest that the domestic economy performed reasonably well in the second quarter – consumer confidence strengthened, unemployment reached a record low of 3.8 per cent in June and construction activity picked up,” the Minister said.
The Irish GDP figure was published on the same day as the French economy was found to have expanded by a faster-than-anticipated 0.5 per cent in the second quarter, while the Spanish economy grew 0.4 per cent. German GDP stagnated, with no quarter-on-quarter change, although revised figures suggested Germany’s winter recession was shallower than initially thought.
Mr McGrath also responded to inflation estimates published on Friday that showed that the EU Harmonised Index of Consumer Prices (HICP) for the Republic is estimated to have increased by 4.6 per cent in the 12 months to July. This is down from a peak of 9.6 per cent last July. This downward trajectory is expected to continue.
“As the fall in wholesale energy prices is passed on at the retail level we expect headline inflation to ease further in the months ahead,” he said. “I am also conscious that core inflation – that is excluding energy and food prices – is still running at 5 per cent. This largely reflects the strength of the economy right now and the achievement of full employment. This is projected to ease, albeit at a somewhat slower pace than for headline inflation.”
