Irish economic growth is estimated to have stalled somewhat in the second quarter of the year, the Central Statistics Office (CSO) said on Friday, as investment levels fell from a high level in the first three months of the year.
Still, the economy, as measured by gross domestic product (GDP), expanded by more than 10 per cent in the three months to the end of June, reversing two consecutive quarters of contraction.
The earlier contraction came off the back of a sharp increase in GDP last year as multinationals, particularly pharmaceutical companies, front-loaded goods exports to the US to avoid tariffs.
However, economists consider Irish GDP to be an unreliable metric due to the distorting impact of large intellectual property and aircraft-leasing transactions by multinationals operating in the State.
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When those activities are stripped out, the Irish economy – as measured by modified domestic demand (MDD) – shrank by 0.8 per cent in the second quarter of 2026 compared with the first, the CSO said.
The modest decline in MDD was driven by a 5.2 per cent slide in investment levels compared with the first quarter. Economists have noted a sharp increase in capital formation in the State over the past year or so, driven by investment in IT equipment as multinational technology companies pump money into data centres and artificial intelligence (AI) infrastructure.
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That trend may have weakened somewhat in the second quarter.
At the midway point of the year, however, MDD was 3.1 per cent higher than the first six months of 2025, the CSO said.
Thomas Pugh, chief economist at RSM Ireland, cautioned against “reading too much into” the decline in MDD in the second quarter.
“Intangible investment is incredibly volatile and heavily influenced by multinationals and the AI buildout,” he said. “What’s more, MDD growth in the first quarter was revised up from 0.3 per cent to a whopping 1.4 per cent. Smoothing through that volatility gives quarterly growth of 0.3 per cent in the first half, which is in line with our expectations.”
CSO national accounts statistician Justin Flannery said the data painted a “mixed” picture of the domestic economy in the second quarter.
Although the decline in MDD is an important signpost for the economy, personal spending increased by 1 per cent while the non-multinational-dominated sector grew by 0.7 per cent over the same period.
The jump in personal consumption was reassuring, Pugh said.
Meanwhile, the reversal of Irish GDP from a dramatic 12 per cent shrinkage in the first quarter to a 10.1 per cent expansion in the second quarter was driven by a 17.1 per cent surge in exports.
Aaron Bright, investment analyst at IG, said the headline figure overstated the performance of the economy, with the gain being driven by multinationals.
The CSO said the highly globalised industrial sector led the charge in the second quarter, increasing the value of its output by more than 22 per cent. The equally multinational-dominated information and communication technology sector expanded by more than 2 per cent.
